Dallas – Drivers, homeowners, airlines and businesses will end up paying higher fuel bills if Hurricane Rita magnifies the damage last month’s Hurricane Katrina inflicted on the oil- refining industry.
Most of the refineries on the Texas and Louisiana coasts were shut down Thursday, and oil and natural-gas rigs stood empty on the Gulf of Mexico as Rita bore down on the heart of the nation’s energy industry.
About 5 percent of the nation’s oil-refining capacity is still out from Hurricane Katrina’s sweep through Louisiana and Mississippi.
In the Houston area, which represents 13 percent of U.S. refining capacity, every major refinery was closed or in the process of shutting down. So were most refineries around Port Arthur, Texas, which represents another 7 percent, and some in Louisiana because of Rita, expected to hit shore Saturday.
“It’s potentially a bigger threat than Katrina because there is more refining capacity in the Houston area,” said Bob Slaughter, president of the National Petroleum & Refining Association. “This is a double whammy for the industry – it’s an amazing thing to contemplate.”
Gasoline for October delivery fell as much as 3.94 cents, or 1.8 percent, to $2.10 a gallon in after-hours electronic trading on the New York Mercantile Exchange, as Rita was downgraded from a Category 5 to a Category 4 storm. Prices touched $2.92 a gallon on Aug. 31, the highest since trading began in 1984.
Crude oil for November delivery was little changed in after- hours electronic trading at $66.59 a barrel. Futures for natural gas, a key fuel for heating homes and producing electricity, climbed past $13 per 1,000 cubic feet, nearly twice the level of a year ago.
Larry Goldstein, president of the Petroleum Industry Research Foundation, estimated that precautionary shutdowns would cut refining capacity by more than 3 million barrels of oil a day – about one-seventh of the U.S. total – for a week. Any damage to the plants would compound the loss, he said.
Tom Kloza, an analyst with the Oil Price Information Service of Wall, N.J., said pump prices along the Gulf Coast may soon jump above $3 a gallon because wholesale gasoline prices in the region have climbed by about 75 cents in the past week to $2.50 a gallon before taxes and dealer markup. Motorists in the East and Midwest would see smaller increases, he said.
Ken Stern, managing director of FTI Consulting, which advises refineries on business strategy, predicted $4 a gallon at the pump for gasoline within two weeks.
“In an environment where capacity is constrained and demand continues pretty much unabated, that’s a formula for significantly higher prices,” Stern said.
Meanwhile, the Labor Department on Thursday increased the total number of job losses attributed to Katrina to 214,000, with 103,000 coming last week.
Some private economists believe as many as a half-million people were thrown out of work by Katrina, and they are forecasting that the nation’s unemployment rate, which had fallen to a four-year low of 4.9 percent in August, will climb when the September report is released Oct. 7.
