Hurricane Katrina ripped through Gulf Coast oil and natural-gas facilities Monday, sending fuel prices rocketing in a chain reaction that could cost Colorado consumers as much as 20 cents a gallon more at the gasoline pump as early as today.
Already-tight supplies of gasoline led analysts to predict almost unheard-of one-day retail price increases, with the possibility of gasoline shortages.
“This is the most volatile pricing market I can remember,” said Steve Douglas, general manager of distribution and marketing for Colorado oil refiner Suncor Inc. “It’s very unusual to see this big a movement in one day.”
Analysts held out the hope that Monday’s price spikes may have been an overreaction to hurricane disruptions and that prices may bounce back to lower levels this week if reports show less damage than feared.
Although the hurricane’s bite was less severe than projected, it shut down most of the oil and gas production platforms in the Gulf of Mexico and many nearby coastal refineries.
Suncor’s Commerce City refinery followed refiner price increases in other parts of the country, Douglas said, raising prices Monday to wholesale suppliers by 15 cents a gallon.
The suppliers passed the increases on to retailers, who in turn are likely to increase pump prices by similar margins, said Bryant Gimlin, energy risk manager for Fort Lupton-based gasoline wholesaler Gray Oil Co.
“The (retail) increases could happen pretty quickly because we’re already in a tight supply situation,” Gimlin said. “It’s based on supply and demand. If there’s a perceived shortage, prices are going up.”
The hurricane produced a ripple effect on already-volatile and thinly stretched energy commodities and created other fallout:
The price of a barrel of crude oil jumped above $70 for the first time in midday trading before closing Monday at a near-record $67.20 on the New York Mercantile Exchange.
Natural gas gained $1.06, or 11 percent, to finish at a record high of $10.847 per million British thermal units in New York.
The jump prompted Xcel Energy to consider filing for an emergency rate increase to cover the soaring prices, which already were expected to cause a 25 percent to 30 percent increase in winter heating bills for Colorado customers.
The increase also could affect prices for electricity because Xcel uses natural gas to generate 48 percent of its power.
Share prices of several major airlines fell on the prospect of sharply higher jet-fuel costs, giving the beleaguered carriers just what they don’t need as they approach a traditionally slow travel season and a few of them flirt with bankruptcy.
The Bush administration said it would consider lending oil from the nation’s emergency stockpile to refiners.
Kuwait’s energy minister, Sheik Ahmed Fahd Al Ahmed Al Sabah, said the Organization of the Petroleum Exporting Countries will consider increasing its production by 500,000 barrels a day next month to mitigate soaring prices.
Cellphone service along the Gulf Coast was spotty and long-distance callers got busy signals as Katrina knocked out key telecommunications hubs along the coast.
Colorado consumers could face gasoline shortages because some refiners may ship scarce fuel to higher-price markets in the Midwest and on the East and West coasts, said Roy Turner, executive vice president of the Colorado/Wyoming Petroleum Marketers and Convenience Store Association.
While Suncor’s Commerce City refinery will continue to supply 35 percent to 40 percent of Colorado’s gasoline, out-of- state refiners that traditionally supply the rest of the state’s gasoline may be pickier in choosing customers.
“They’re going to go where the highest price is,” Turner said. “Supplies are tight already, and as low as our (refinery) inventories are here, I think we could see some supply disruptions.”
Some analysts said crude-oil supplies are adequate. The problem, they said, is in refining capacity. The hurricane caused at least eight Gulf Coast refineries to shut down or reduce operations by Monday, according to company and U.S. Department of Energy reports. The eight represent about 2.3 million barrels of daily refining capacity.
Even though early assessments showed minimal damage to the refineries, it may take several days for them to complete damage reports and restart production, analysts said.
“It’s going to take them a few days to assess the damage, and then they still need state and federal approval to start up again,” Gimlin said.
Denver Post news services contributed to this report.
Staff writer Steve Raabe can be reached at 303-820-1948 or at sraabe@denverpost.com.
Impact in Colorado
At least three Denver-based oil and gas companies have operations in the Gulf of Mexico:
Companies affected: Cimarex Energy, Forest Oil, St. Mary Land & Exploration Co.
Damage: Officials at the companies said Monday it was too early to assess potential damage from the hurricane.
Big picture: The federal Minerals Management Service said 92 percent of the region’s oil output was shut in, or shut down. The agency said 83 percent of natural-gas output was shut in because of Katrina.
Production: Cimarex temporarily suspended production from its gas and oil wells in the gulf, which account for 15 percent of the company’s total production. Some of Cimarex’s wells are in the western part of the gulf – away from the hurricane – and are expected to return to production relatively soon, said company spokesman Mark Burford.
What Cimarex is saying:
“The good news is that all the workers were evacuated safely.”
– Burford
DENVER POST STAFF AND WIRE REPORTS
