The Marketplace Report: Rita's Oil Industry Punch
NOAH ADAMS, host:
Back now with DAY TO DAY. I'm Noah Adams.
Hurricane Rita has been sending shock waves around the world's financial markets. Shares in some insurance companies have fallen sharply. The worry is that Rita could cause even more destruction than Katrina and trigger further multibillion-dollar claims. But the biggest fear is about oil and whether this hurricane will damage more installations and push fuel prices even higher. Joining us now from London is "Marketplace's" European editor Stephen Beard. He's been talking to dealers in the London oil market.
What's happening there to the price of crude, Stephen?
STEPHEN BEARD reporting:
Well, Noah, it's been moving higher for much of the day, edging back up towards that $70-a-barrel level for high quality American crude which we last saw in the immediate aftermath of Katrina.
ADAMS: Are they thinking that Rita will actually knock out some of those oil rigs out in the Gulf of Mexico?
BEARD: Yes, that's the first concern, the impact on crude production. Our information is that more than half the manned offshore platforms and oil rigs in the Gulf have been evacuated because of Rita, and that's nearly three-quarters of oil production in the Gulf now shut down. So a region that was only beginning to recover after Katrina now has yet more disruption.
And there's some concern that because Rita is so powerful, and more powerful than Katrina, she could cause serious damage to underwater pipes and other installations which could take weeks and perhaps even months to repair, which obviously would further reduce the flow of crude.
ADAMS: And then you get to the flow of gasoline to the pumps eventually.
BEARD: Very much so. If Rita keeps to her present path, she could hit as many as 16 American oil refineries. And as senior London oil trader Rob Laughlin told me, that includes three of the most important.
Mr. ROB LAUGHLIN (London Oil Trader): Most notable is the big BP Texas City Refinery, which is a refinery worth around 500,000 barrels a day. You've got the Lake Charles Refinery, the Port Arthur Refinery, three of the largest refineries in the Southern side of the US. They're all at risk.
BEARD: Lasting damage to big refineries like that means more expensive gasoline, of course. And that naturally will mean more expensive gasoline on this side of the Atlantic, too, as American oil companies and distribution companies will be shopping around for refined product here as they did after Katrina.
Well, coming up later today on "Marketplace," we'll have the latest on Rita's economic repercussions. We'll take a look at the effect natural disasters have on the multibillion-dollar municipal bond markets.
ADAMS: Stephen Beard of public radio's daily business show "Marketplace." "Marketplace" joins us regularly at this time for talks about money and business. It's produced by American Public Media.
Thank you, Stephen.
BEARD: Thank you.