With Tropical Storm Gustav bearing down on the Gulf of Mexico and most weather agencies calling for an active hurricane season, motorists should brace for gasoline to spike to $1.75 per litre as storms threaten to shut down oil production in the region, predicts a new report from CIBC World Markets.

Gustav is “tracking another potentially lethal swath through America’s energy heartland” three years after hurricanes Katrina and Rita upset production there, says Jeff Rubin, chief economist at CIBC World Markets.

“And with both oil and gasoline inventories much lower than when Katrina and Rita hit, the price consequences could be even worse this time. Any replays of the 2005 storm season could see gasoline prices soar to $1.75 per litre,” he says.

The report notes that while previous hurricanes have caused equipment damage and production losses, the toll has increased in recent years. The top five hurricanes, in terms of lost production, have all occurred in the last half-decade and their impacts are becoming more lasting. Three months after Katrina and Rita hit, nearly 40% of Gulf oil production was still shut in. Together, Katrina and Rita damaged 167 offshore platforms and 183 pipelines.

The report finds that any decline in Gulf production from Gustav will be difficult for the U.S. to replace. It notes that even if approval is granted to open development in the Arctic National Wildlife Refuge (ANWR), the U.S. Department of Energy estimates that first flow will not occur until 2018, and initial first estimates from the Arctic are notorious for lengthy pushbacks. Moreover, it would take a minimum of a decade after that to reach its ultimate projected peak of 780,000 barrels daily.