Oil companies began closing Texas refineries Wednesday, threatening the supply of gasoline to the nation’s pumps as Hurricane Rita grew more violent and took aim at a stretch of the Texas Gulf Coast that holds one-fourth of the nation’s oil-refining capacity.
Experts say the refineries, nestled in a 300-mile swath from the Louisiana border to Corpus Christi, would recover within a couple of days from a glancing blow. But if Rita swamps Houston as Hurricane Katrina did to a three-state area along the Gulf of Mexico last month, they warn, the storm will take more dollars from motorists’ wallets and add to the problems of the nation’s airlines.
BP PLC began closing its massive Texas City refinery on Wednesday. Marathon Oil Corp. and Shell Oil did the same at their refineries near Houston. Shell’s refinery kept running through the last major Texas hurricane, Alicia, in 1983.
“It was a split decision between taking a risk and playing that waiting game of seeing where it’s going to land, and being sensitive to employees getting home,” said David McKinney, a Shell spokesman.
Meanwhile, in the Gulf of Mexico, Rita began to take a toll on oil production, which hadn’t yet fully recovered from Hurricane Katrina.
Driller Transocean Inc. dragged four movable rigs in the central gulf out of the storm’s projected path and evacuated about 500 workers from three rigs that are moored to the seabed floor.
BP, which began evacuating workers from platforms off the Alabama coast Sunday, said it was also removing nonessential employees from platforms in the western Gulf, out in front of Rita’s path.
Exxon Mobil, Chevron Corp., Shell, a subsidiary of Royal Dutch/Shell Group, El Paso Corp. and others also continued to evacuate employees from many rigs and platforms.
Combined, the damage from Katrina and the precautionary evacuations because of Rita have slashed normal gulf oil production of 1.5 million barrels a day by 73 percent, the U.S. Minerals Management Service said Wednesday.
Since Katrina evacuations began Aug. 26, the storms have cut more than 27 million barrels of oil production, or 5 percent of the gulf’s annual production, the agency said. Natural-gas production was 47 percent below normal Wednesday.
Light, sweet crude for November delivery rose 60 cents to settle at $66.80 a barrel on the New York Mercantile Exchange, after surging as high as $68.27 earlier Wednesday. Heating oil jumped nearly 3 cents to $2.0387 a gallon.
Wholesale gasoline prices in Denver rose between 10 and 25 cents a gallon Wednesday, said energy analyst Bryant Gimlin of Gray Oil Co. He said the increases may show up in retail pump prices in the next few days.
Retail gasoline in Colorado averaged $2.90 a gallon Wednesday, down 17 cents from the record high of $3.07 this month.
Rita became a Category 5, 175-mph storm Wednesday and is expected to hit the Texas coast early Saturday.
“We’re closely watching this hurricane, and we realize its full potential,” said Neil Geary, a spokesman at the BP refinery, which produces gasoline, jet fuel and other products.
Texas refineries are clustered around Houston, Port Arthur and Corpus Christi, “and any one of those being forced to shut down is pretty bad,” said Roger Diwan, who studies oil markets for research and consulting firm PFC Energy in Washington.
Diwan said under the best circumstances – if the hurricane causes no damage to the plants – it would take four to five days for the refineries to resume operations after a shutdown.
Analyst Tom Kloza of research firm Oil Price Information Service called the reaction hysteria – unless Rita scores a direct hit on Texas City or the Houston Ship Channel, which is lined with refineries and chemical plants. He said that unlike the Louisiana refineries that were knocked out by Katrina, the Houston-area plants are well above sea level and have withstood big storms before. The most likely threat, he said, might be power outages.
