Energy Prices Jump on New Storm Fears
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With tropical storm Rita headed toward the Gulf of Mexico, energy prices soared today. The price of a barrel of oil, which has been falling in recent days, jumped about 7 percent on the New York market. Gasoline futures were also higher. NPR's Jim Zarroli reports.
JIM ZARROLI reporting:
In the days before Hurricane Katrina, the energy markets grew complacent. A lot of traders dismissed speculation that the storm would do much damage. This time around, no one is making that mistake. As Rita began to move toward the Gulf, energy prices began to rise, and by the end of the day, gasoline futures were up 14 percent. Heating oil futures were up 11 percent. Fadel Gheit is senior energy analyst at Oppenheimer & Company.
Mr. FADEL GHEIT (Senior Energy Analyst, Oppenheimer & Company): We are really suffering from the previous hurricane. The facilities are not back online and will not be back online for quite a long time, so the market, really, is very apprehensive and cannot stand another push.
ZARROLI: Meanwhile, Royal Dutch/Shell and Chevron reportedly were again evacuating workers from oil rigs in the Gulf, many of which are being repaired. Today's price surge comes at a time when oil has been falling back down again. Oil hit almost $71 a barrel in the days after Katrina, but it has been reversing course lately as production in the Gulf began to recover. But Fadel Gheit says production capacity in the Gulf remains severely strained.
Mr. GHEIT: Overall, I think that the Gulf production is down by about 50 percent from the pre-hurricane levels. You know, we're talking about more than a million barrel a day, combined oil and gas, that's been taken out of the market.
ZARROLI: And Gheit says about 35 percent of the Gulf's refining capacity remains down because of Katrina. Four refineries in Louisiana and Mississippi are shut down, including two of the largest facilities, and it's not clear when they will reopen. Many traders are worried that Rita could damage parts of the oil infrastructure that were spared by Katrina. As oil markets closed this afternoon, it appeared the storm could be headed for the Texas coast, where 26 petroleum refineries are located, about a quarter of total US capacity.
Oil prices were not helped by mixed signals from OPEC officials who are meeting in Vienna. The United States has pushed OPEC to increase production, and OPEC officials have said they are willing to release two million barrels a day of spare capacity, but they stopped short of actually increasing quotas, saying they would do so only if it was absolutely necessary. Jim Zarroli, NPR News.