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Rita May Cause Rhode Island Gas Prices to Rise

Posted on: Monday, 26 September 2005, 21:00 CDT

By Timothy C. Barmann, The Providence Journal, R.I.

Sep. 27--Gasoline prices in Rhode Island have dropped for the third straight week, but hurricane-related supply disruptions in the Gulf of Mexico could reverse that downward trend.

The average price of regular self-serve gasoline yesterday was $2.919 a gallon, down 6 cents from the previous week, and down 28 cents from the all-time high of $3.179 on Sept. 12.

But energy prices on the futures market rose yesterday, as analysts started to learn what kind of damage Hurricane Rita inflicted on the energy infrastructure in the Gulf.

Crude oil for November delivery closed up $1.63, or 2.5 percent, at $65.82 a barrel on the New York Mercantile Exchange. The record was $70.85 on Aug. 30. Prices are 33 percent higher than they were a year ago.

Gasoline for October delivery closed up 4.36 cents, or 2.1 percent, at $2.129 a gallon on the NYMEX. The record high was $2.92 a gallon, reached Aug. 31.

President Bush said in a news conference yesterday in Washington that the United States will lend more oil from the national Strategic Petroleum Reserve to alleviate shortages in crude oil.

But that won't help gasoline production because the crude oil still needs to be refined before it gets to service stations.

There were 20 refineries that were off-line yesterday, including 4 that were already shut down because of Hurricane Katrina.

Those 20 refineries produce about 5 million barrels of various fuels a day, or about 29 percent of production nationwide, according to the Energy Information Administration.

Mr. Bush said that 1.8 million barrels-a-day capacity will get back on line "relatively quickly," but it's still not clear how long it will take for refineries in the path of Hurricane Rita that account for 1.7 million barrels a day of production, he said.

"These storms show that we need additional . . . refining capacity," Mr. Bush said, according to a White House transcript of the news conference.

"The storms have shown how fragile the balance is between supply and demand in America.

"I look forward to working with Congress, as we analyze the energy situation, to expedite the capacity of our refiners to expand and/or build new refineries."

The refinery crunch is likely to push up gasoline prices, said Jonathan Cogan, energy-information specialist with the Energy Information Administration.

A downturn in gasoline supply "generally points to higher prices," Cogan said in an interview.

It remains unclear how much the situation will push up gasoline prices, he said, and it will take some time to make those assessments.

Even those refineries that weren't damaged will take several days to a week to restart, Cogan said.

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Copyright (c) 2005, The Providence Journal, R.I.

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Source: Providence Journal

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