The rise in oil prices to $70 a barrel after Hurricane Katrina swept through the Gulf of Mexico has highlighted the fact that the US refinery industry is unable to handle short-term supply disruptions. This is likely to keep oil prices high for several years.

The hurricane has shut nine refineries with a combined capacity of 2m b/d or about 12.5 per cent of US refining capacity. It has also shut 1.4m b/d of crude oil production, or about 90 per cent of US Gulf of Mexico output, and 88 per cent of the region’s natural gas.