DALLAS – Oil companies said Monday that damage to their massive Texas refineries from Hurricane Rita appeared lighter than expected, but analysts are still predicting that retail gasoline prices may remain near $3 a gallon for weeks or even months longer.
That's a consequence of tight supplies and the fact it may take weeks to restart refineries that closed in the wake of the hurricane in Texas and Louisiana – about a dozen. Combined with reports of Rita-related damage to rigs in the Gulf of Mexico, the idle refineries raised fears about shortfalls of heating oil and natural gas, fuels homeowners will use to warm their homes this winter.
That uncertainty was evident in energy markets Monday as crude oil futures rose more than $1 a barrel and gasoline and natural gas futures also climbed.
"We didn't dodge a bullet with Rita, we took a couple bullets in the legs with Katrina and Rita," said Tom Kloza, an analyst with the Oil Price Information Service of Wall, N.J. "It's still a significant loss, and it's going to create some supply problems through at least mid-October."
President Bush asked Americans on Monday not to drive if they don't have to, and he said the government is prepared again to tap the Strategic Petroleum Reserve to damp pump prices.
The good news was that retailers around the country said there was less panic buying than after Hurricane Katrina struck.
Jay Ricker, president of Ricker Oil Co. in Anderson, Ind., which owns about 30 stores and supplies gasoline to 30 more, said he saw fewer fearful motorists topping off their tanks. "There was very little panic buying this time," he said. "There's just not enough capacity to fill everybody's tank."
Normally by this time of year, refineries are beginning to shift production from gasoline to heating oil. But analysts said oil companies will be under pressure from politicians and the public to produce enough gasoline to prevent shortages and keep prices from spiking much above $3 a gallon. That could push production of heating oil back later than usual, they said.
The loss of natural gas is potentially even more worrisome, analysts said, because disruptions to crude output can be offset by barrels from the rest of the world, plus the government's emergency reserve. There is no such safety valve for natural gas, and the country's ability to import liquefied natural gas is limited.
Early estimates were that Hurricane Rita will cost U.S. refiners about 800,000 barrels a day in oil refining capacity, on top of about 900,000 barrels a day still down due to Katrina.
Bill Veno, a director at consultant Cambridge Energy Research Associates, predicted roughly $3 a gallon at the gas pump into next year. "We still have the carryover of the impact from Katrina, and even though we didn't sustain as much damage with Rita, it's cumulative," he said.
Before Rita crashed ashore along the Texas-Louisiana border on Saturday, industry officials had worried that high winds or flooding could knock out electric lines that power refineries and damage pipelines that carry finished goods to consumers as far away as the East Coast.
But by the time Rita came ashore Saturday, it had weakened from a Category 5 monster to a Category 3 hurricane. The storm struck only a glancing blow at the Houston area, with the nation's largest concentration of oil refineries, but scored a direct hit around Port Arthur and Beaumont, in the southeast corner of Texas.
Power was restored quickly to about nine refineries in the Houston area, of which four are still not operating. Four more refineries in Port Arthur and Beaumont, Texas, are still without electricity; three in Louisiana are off-line.
Rita sharply cut the flow of crude oil from the Gulf of Mexico, as oil production halted completely and 93 percent of manned platforms remained empty Monday, according to the federal Minerals Management Service. Since Katrina evacuations began, oil companies have lost 34.8 million barrels of oil or 6.4 percent of a full year's production from the Gulf, the agency said.
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Associated Press Business Writer Brad Foss in Baton Rouge, La., contributed to this report.
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