8-30-05 - The shutdown of oil platforms, refineries and pipelines along the Gulf Coast drove energy prices to new highs Tuesday, all-but-guaranteeing a surge in pump prices in the days ahead. Oil prices briefly jumped above $70 a barrel.
The trading frenzy on futures markets reflected uncertainty and fear about the full extent of the damage Hurricane Katrina inflicted on key energy infrastructure, as well as the constraints being felt where actual shipments of gasoline, heating oil and jet fuel are bought and sold.
"This is an extremely serious situation," said Tom Kloza, director of the Wall, N.J.-based Oil Price Information Service.
Analysts said that even if Katrina did less harm than feared its effects would nevertheless tighten the availability of already scarce refined products, such as heating oil and gasoline.
In wholesale markets on the Gulf Coast, some gasoline was being priced as high as $2.85 a gallon and in the Midwest, prices were as high as $2.65 a gallon, Kloza said. Retail costs are typically 60 cents higher, meaning motorists in these regions could very well see pump prices in some markets exceed $3 a gallon.
Light sweet crude for October delivery rose $2.15 to $69.35 a barrel by afternoon on the New York Mercantile Exchange. Prices had reached as high as $70.85, a new high on Nymex, although still below the inflation-adjusted high of about $90 a barrel that was set in 1980.
September gasoline futures rose 29.94 cents, or 14.5 percent, to $2.36 a gallon on Nymex, where trading was halted briefly after the exchange's 25-cent trading limit was reached. Heating oil futures climbed by 12.12 cents to $2.03 a gallon.
Natural gas futures raced higher as well. Natural gas for October delivery traded at $11.75 per 1,000 cubic feet, an increase of 61.1 cents.
Analysts believe that the operations of natural gas processors and chemical manufacturers, who depend heavily on the natural gas as a feedstock, could be disrupted for days, if not weeks.
The runup in natural gas and heating oil futures may mean sharply higher home-heating bills lie ahead this winter.
In addition to refineries and oil platforms, critical infrastructure that remained out of service included:
- the Louisiana Offshore Oil Port, the largest oil import terminal in the United States.
- the Colonial Pipeline, which transports refined products such as gasoline, heating oil and jet fuel from Houston to markets as far away as the Northeast.
- the Plantation Pipe Line, which transports fuel from refineries in Mississippi and Louisiana to consuming markets as far away as northern Virginia.
- the Capline pipeline system, which transports crude oil from the Gulf to the Midwest.
"These are pretty challenging circumstances," Kloza said.
Companies are scrambling to assess damage to their platforms, pipelines and refineries _ a task easier said than done in some cases because, in addition to flooding, the Gulf Coast has been plagued by power outages.
Most energy companies still have not been able to visit their facilities and are relying on aerial surveillance for preliminary examinations.
Such is the case for Chevron Corp., which shut down its 325,000 barrel a day Pascagoula, Miss., refinery before Katrina's arrival. "We are hoping to get in there today, but that's the issue _ getting there," said company spokesman Michael Barrett.
Marathon Oil Corp. was also playing a waiting game to reach its 245,000 barrel a day refinery in Garyville, La. "We are trying to re-board and assess what, if any, damage has occurred and what work needs to be done before we can restart," spokesman Paul Weeditz said.
Others were able to identify some trouble by late Monday. Valero Energy Corp. said its St. Charles refinery in Norco, La., which has capacity of 260,000 barrels a day, might not be restarted for another two weeks.
Nymex oil futures settled at $67.20 a barrel Monday, easing from highs above $70 a barrel amid speculation that the Bush administration might loan crude from the U.S. Strategic Petroleum Reserve to refiners that request it.
But some analysts on Tuesday said the impact of such a move would be minimal.
"The release of crude out of the Strategic Petroleum Reserve is not as critical as making sure that there is enough refined product supply and that there are refineries to process the crude," said analyst Victor Shum from Texas-based consultants Purvin & Gertz.
At least eight Gulf Coast refineries in the path of Hurricane Katrina shut down or reduced operations, taking out anywhere from 8-10 percent of production capacity, according to company and federal reports.
Katrina, which struck the Gulf Coast as a Category 4 storm, was blamed for at least 55 deaths and the evacuation of more than 700 offshore platforms and rigs. It slammed into a major oil production hub at a time when producers worldwide were already struggling to cope.
Organization of Petroleum Exporting Countries secretary general Adnan Shihab-Eldin reiterated Tuesday that the group will supply extra barrels of crude oil to refiners if they want them. Previous OPEC pledges have done little to ease market fears over supply.
The U.S. Minerals Management Service said Monday that 92 percent of the region's oil output was out of service, with more than 3 million barrels of production lost since Friday. The agency said 83 percent of natural gas output was shut down, resulting in a loss of 15.5 billion cubic feet of lost production since Friday.
The Gulf of Mexico normally produces 2 million barrels of crude oil a day and about 10 billion cubic feet a day of natural gas.
Posted: 12/04/2013 - DALLAS (AP) - A blast of arctic air is headed for Texas, promising at least days of subfreezing temperatures and wintry precipitation in much of northern and western Texas.
Posted: 11/04/2013 - (MURRAY COUNTY, OKLAHOMA ) -- OHP says two teen boys were injured in a head-on collision near Sulphur this afternoon.
Posted: 10/10/2013 - GRAYSON CO, TX-When the government shut down 10 days ago, so did the U.S. Department of Agriculture. Area farmers said if the shutdown continues, it will affect their benefits and a farm bill they depend on for their livelihood.
KXII has a brand new app! We have added loads of great new features including Live Video, Improved Weather & Radar, Easier Navigation and more.