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Gas Futures Soar in Katrina's Wake

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Gas Futures Soar in Katrina's Wake

Economy

Gas Futures Soar in Katrina's Wake

Gas Futures Soar in Katrina's Wake

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As fears of lasting storm damage to Gulf Coast refineries send the price of gasoline futures soaring, prices at the pump creep higher, too. Oil companies continue to assess damage.

RENEE MONTAGNE, host:

Hurricane Katrina could be the costliest storm in America's history. It's sure to be costly for the nation's energy consumers, with oil and gas prices rising sharply in Katrina's wake. NPR's Scott Horsley reports.

SCOTT HORSLEY reporting:

The price of gasoline on the futures market soared more than 41 cents a gallon yesterday amid fears that Hurricane Katrina may have done lasting damage to Gulf Coast oil refineries. So far, retail pump prices have not shown that kind of increase, but Justin McNaull of AAA says drivers are seeing more modest price jumps of a few pennies at a time.

Mr. JUSTIN McNAULL (AAA): The question remains to be seen how much of the frenzied bidding up that's going on at the futures level will ultimately get passed across at the consumer side. Or will the futures market sort of correct itself without causing too much of a price increase for us as motorists?

HORSLEY: Much of that will depend on how quickly Gulf Coast refineries shut down by the storm can be restarted. Ordinarily, those refineries produce about a million barrels of gasoline a day, or more than 10 percent of the nation's total. Doug MacIntyre of the Energy Department's information arm says there's no telling yet how long the country will have to get by without that gas.

Mr. DOUG MacINTYRE (Energy Department): First thing, you have to get the employees back. Then the second thing, then they have to do an assessment of if there was any damage to the refineries. And the third, and what may be the most problematic, is they need to get the electrical power systems in these refineries restored, 'cause without electricity, they just are unable to produce.

HORSLEY: None of those steps will happen overnight. Several Louisiana refineries were reported to be under water yesterday. Chevron was doing aerial inspections of its refinery in Pascagoula, Mississippi, wary of putting people on the ground until their safety could be assured. Marathon Oil was bringing in relief supplies for the skeleton crew at its refinery in Garyville, Louisiana. Spokeswoman Angelia Graves says with some 400 workers to account for, employee safety is Marathon's biggest concern.

Ms. ANGELIA GRAVES (Marathon Oil Spokeswoman): We actually had employees there that were in the facility during the storm, and they've been able to get out into the refinery and they're the ones that are doing the assessment. We've also brought some additional employees back into this facility.

HORSLEY: Graves could not predict how quickly that assessment might be done or when the refinery might resume operation. She adds the impact of the hurricane is already being felt far beyond the Gulf region.

Ms. GRAVES: We actually have seven refineries in our network throughout the United States. You know, we have been running those refineries all out so that we could keep up with the supply, but they, too, have been impacted because the oil port where they off-load crude oil was also shut down. So crude oil has not been coming up into some of those refineries that are located in the Midwest.

HORSLEY: One encouraging note: An initial assessment of Louisiana's offshore oil port found no apparent catastrophic damage. Ordinarily, that port handles about a million barrels of crude oil a day. Crude oil production in the Gulf is still at a virtual standstill and some lawmakers are calling on President Bush to tap the Strategic Petroleum Reserve to make up for the missing oil. AAA's Justin McNaull isn't sure that would help.

Mr. McNAULL: The real concern on the distribution side of things is the refineries. And depending on how well they've come through the storm, we might not have the capacity to refine a lot more crude oil even if it were made available. And that really is the choke point or the hiccup that we could be looking at in the distribution process.

HORSLEY: McNaull's advice for drivers is go easy on the gas and resist panic buying to avoid a run on filling stations. Scott Horsley, NPR News.

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