Oil Markets Exhale as Rita Passes By Oil prices fell on world markets Sunday as traders expressed relief that Hurricane Rita spared most of the refineries along the Texas Gulf Coast.
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Oil Markets Exhale as Rita Passes By

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Oil Markets Exhale as Rita Passes By

Oil Markets Exhale as Rita Passes By

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DEBBIE ELLIOTT, host:

From NPR News, this is ALL THINGS CONSIDERED. I'm Debbie Elliott.

Hurricane Rita damaged three oil refineries in Louisiana and Texas, but most rigs, pipelines and refineries appear to have been spared. As a result, oil industry officials were breathing a sigh of relief, and energy prices fell back down again today. NPR's Jim Zarroli reports.

JIM ZARROLI reporting:

After seeing how much damage Katrina did to the nation's oil and gas infrastructure, energy traders were expecting the worst from Rita. There was so much concern that the New York Mercantile Exchange allowed the markets to open today so traders could respond to the damage reports earlier than usual. As it happened, Rita bypassed the city of Houston, which is the heart of the oil and gas industry, and hit farther up the coast, and the damage appears to have been less severe than feared. Texas Governor Rick Perry spoke on "FOX News Sunday."

(Soundbite of "FOX News Sunday")

Governor RICK PERRY (Republican, Texas): The refineries appear to be in relatively good shape. I think we had one gasoline--or, excuse me, one gas pipeline that was ruptured, but it's being repaired as we speak.

ZARROLI: There were some exceptions. Valero Energy said the cooling towers of its Port Arthur refinery were damaged. The facility processes 255,000 barrels of oil a day. It will be closed for at least two weeks. Another refinery in Port Arthur was damaged, as was one in Lake Charles, Louisiana. Still, that was much less serious than the damage caused by Katrina, which temporarily knocked down most of the oil refineries in Louisiana and Mississippi. ExxonMobil said its Baytown refinery, which is the largest on the Gulf Coast, sustained little damage during Rita. And unlike Katrina, Rita doesn't appear to have knocked out any major pipelines.

The better-than-expected outcome sent energy prices down sharply today. The price of a barrel of oil, which was more than $67 last Monday, fell to less than $63. Phil Flynn is vice president of Alaron Trading.

Mr. PHIL FLYNN (Vice President, Alaron Trading): The prices have come down because we really dodged a big bullet. You know, when we talk about all the refineries in that area, I think it's kind of a moral victory to only have two that suffered damage. You know, we could have lost 10 percent of our refining capacity, and we didn't.

ZARROLI: Flynn says barring another hurricane or other catastrophe, oil and gas prices shouldn't spike again like they did last week. He says this time of year is a period of relatively low demand for the energy industry, and there's time to repair the facilities damaged by the two hurricanes. But Daniel Yergin, president of Cambridge Energy Research Associates, says the repairs aren't going to happen overnight.

Mr. DANIEL YERGIN (President, Cambridge Energy Research Associates): You still have a significant part of US refining capacity that, even if it's only for a few days, shut down. And you have a closing down of a hundred percent of the oil production and a large art of the natural gas production in the Gulf of Mexico. So we still will be playing catch-up as we go into the winter.

ZARROLI: Yergin says these supply disruptions are going to be felt by consumers. Even though Rita's impact was less than expected, it will take time to bring refineries back online and get staff members who were evacuated back into the region. In the meantime, the price of oil and gas is likely to rise. Jim Zarroli, NPR News.

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