With crude-oil prices already near record levels, Hurricane Katrina targeted the heart of America's oil and refinery operations yesterday...
NEW YORK — With crude-oil prices already near record levels, Hurricane Katrina targeted the heart of America’s oil and refinery operations yesterday, shutting down an estimated 1 million barrels of refining capacity and sharply curbing offshore production in the region.
It is an area crucial to the nation’s energy infrastructure: Roughly 30 percent of the oil and gas consumed in the United States flows along pipelines or is hauled in on tankers and barges in the Gulf Coast.
A major hit would disrupt fuel shipments and send prices soaring even higher right before the Labor Day holiday, when more than 34 million Americans are projected to hit the road.
The impact was immediate last night when electronic trading resumed on the New York Mercantile Exchange, as crude-oil futures spiked $4.50 per barrel, putting the cost above $70 for the first time since oil began trading there in 1983.
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The average price for all three grades of gasoline rose nearly 13 cents in the two weeks ending Aug. 26, said Trilby Lundberg, who publishes the semimonthly Lundberg Survey of 7,000 gas stations around the country.
Self-serve regular averaged $2.65 a gallon nationwide. Midgrade was pegged at $2.72, with premium-grade at $2.82, according to the survey.
Gas prices usually peak in August and then drop after Labor Day, when Americans begin driving less. Damage from Katrina could keep prices high much longer.
The Category 5 storm was still churning in the Gulf of Mexico last night but was on a path to hit New Orleans at sunrise today.
Oil companies evacuated workers and shut down more than 600,000 barrels of daily production in the Gulf. Refiners closed down more than 1 million barrels of refining output by yesterday, but that amount could be higher because not every producer reports data, said Peter Beutel, an oil analyst with Cameron Hanover.
“This is the big one,” he said. “This is unmitigated bad news for consumers.”
Gasoline futures soared more than 20 cents per gallon, above $2.12 per gallon, and natural gas was up $2.20 per 1,000 cubic feet in the opening minutes of trade.
The “out-of-control” buying is spurred by the prospect that the region’s numerous refineries could be idled for weeks, Beutel said.
The U.S. has ample crude-oil supplies, even if major hurricane destruction trims Gulf oil output and foreign imports, but refining capacity is extraordinarily tight. As a result, prices for gasoline, heating oil, jet fuel and other products have flirted with records and could go higher this week.
“If this thing knocks out significant quantities of refining capacity … we’re going to be in deep, dark trouble,” said Ed Silliere, vice president of risk management at Energy Merchant in New York.
The market has been on edge for months, with traders and speculators buying on the slightest fear. With Katrina, all those fears could be realized, Beutel said.
ChevronTexaco completed evacuations of all workers in the eastern and central Gulf of Mexico and nonessential workers in the western Gulf late Saturday, company spokesman Matt Carmichael said.
Material from Knight Ridder Newspapers is included in this report