Oil Patch in Direct Line of Storm

Port Arthur and Beaumont, Texas, and Lake Charles, La., appear to be taking the brunt of Hurricane Rita's wrath... and they're also at the heart of the region's oil industry. New York Times columnist Joe Nocera talks about the implications.

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SCOTT SIMON, host:

Hurricane Rita has made landfall this morning at the heart of America's oil-refining industry, the Texas-Louisiana border. Port Arthur and Beaumont, Texas, and Lake Charles, Louisiana, are being lashed by the storm at this hour. In the wake of Rita and Katrina, the oil industry and local businesses must find a way back along the Gulf Coast, from Galveston to New Orleans. Joe Nocera, our friend from the world of business and columnist for The New York Times, joins us from member station WFCR in Amherst, Massachusetts.

Joe, thanks for being with us.

JOE NOCERA (The New York Times Columnist): Thanks for having me, Scott.

SIMON: You're an old Texan. You know something about this stuff...

NOCERA: I am.

SIMON: ...as opposed to some other stuff. What can you tell us about oil production, how it's going to be affected by the storms?

NOCERA: Well, it--a lot depends on how much damage Hurricane Rita does to the refineries. But unlike Katrina, which definitely hit refineries, this is the sweet spot, this is the dead center, Beaumont and Port Charles, of the refinery in the United States. And even before all these storms, Scott, refineries were going at 100 percent of capacity I mean, there's no excess capacity in the system. That's why prices have been going up. And, you know, the first hurricane did damage to refineries and if the second hurricane does similar damage, you know, we're looking at, I hate to say it, 4 to $5 at the pump, I think, fairly quickly.

SIMON: I saw some people, industry people, who were interviewed, who said, `Look, these oil-drilling rigs, because they're rigs, because they're not infrastructure on land, can actually be repaired fairly easily.' And they say they've been back into production within a week in some areas along the Gulf. Does that make sense to you?

NOCERA: Well, it make--yes, it does. And the pipelines can be repaired. But the problem is the refineries, which are on land. And they're more complicated and it doesn't take much, right now, in this environment, where demand for oil is skyrocketing and supply is having trouble keeping up--it doesn't take much to put everything out of skew and drive prices dramatically. And that's what you have to worry about with this hurricane.

SIMON: I want to ask you about New Orleans. The city is once again experiencing flooding because of Rita and, of course, was--many parts of it certainly devastated by Hurricane Katrina. Water from the Industrial Canal and Lake Pontchartrain poured into the city yesterday. The business community there has sometimes been described as `insular.' What does that...

NOCERA: To say the least.

SIMON: Well, what...

NOCERA: To say the least.

SIMON: Well, what is that going to do to recovery?

NOCERA: It's going to be a problem, I think. It has long had a hostile business climate, sad to say, and it's been the kind of place where, you know, what really mattered in New Orleans was how long you've lived in New Orleans, you know, generationally, three, four, five generations. And, you know, you take cities like Atlanta or Orlando, Houston, Dallas, you know, these kind of go-go Southern cities, that was completely missing in New Orleans. It was not very accepting of outsiders who came in with money wanting to build things, start companies, and that's why, you know, it only has one Fortune 500 company, which is the local utility, Scott. And the largest employer is Tulane University. So the big problem from New Orleans is: How are they going to get companies to locate there now after all of this when they've, you know, spent the last 50 years saying, `Don't locate here'? And I don't really know what the answer to that is.

SIMON: Well, are there tax incentives now that might be approved by legislative bodies?

NOCERA: Well, sure, there are going to be all sorts of tax incentives. No question about it. The real issue, though, is how should the federal money be spent and how should tax incentives be spent, and I would argue that the center of rebuilding New Orleans is going to be the tourism industry in one way, shape or form. There's all kinds of ideas floating around on how to make it bigger and better. Someone proposed a museum of jazz. Others have proposed casino gambling, but you're going to need housing for the people who work there and to me the best way to spend federal money in New Orleans is to spend it on schools, which were terrible, and spend it on low-income housing so people finally have a decent place to live who have these minimum-wage jobs.

SIMON: Joe Nocera, business columnist for The New York Times. Thanks very much for being with us from Amherst today.

NOCERA: Thanks a lot, Scott.

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