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Gulf Coast Refineries Help Ease the Price Pressure on Gasoline

Posted on: Thursday, 25 May 2006, 15:00 CDT

FORT WORTH, Texas _ Gulf Coast refineries are now operating at better than 90 percent of capacity, indicating a continuing recovery from damage by last year's hurricanes, and easing the pressure on gasoline prices as motorists head into the Memorial Day weekend.

Gas prices have eased slightly from their highs of recent weeks thanks to dimming worries of an ethanol shortage, rising inventories of crude oil and gasoline and the slow restoration of refining and production on the U.S. coast of the Gulf of Mexico.

The traditional summertime holiday driving season begins this weekend, and the annual hurricane season arrives next week even as oil companies and refiners continue to repair the damage from the 2005 season.

While refining capacity is back to near normal, 22 percent of Gulf of Mexico oil production and 13 percent of natural-gas production were still out of service as of May 22, according to the Minerals Management Agency.

Royal Dutch Shell said last week that its Mars platform, the largest producer in the Gulf of Mexico, could be restored by the end of June.

The 140,000-barrel offshore well platform had been out of service since Aug. 31 when Katrina hit.

Two other big refineries, operated by Total and Kerr-McGee, are expected to resume service soon, the Minerals Management service reported.

All of that has improved the retail-gasoline market.

Further downward pressure on gasoline prices was exerted by the crude-oil market on the New York Mercantile Exchange, where the July contract fell $1.66 per barrel Wednesday to $70.10.

The market was reacting to the weekly report from the Energy Information Agency of the U.S. Department of Energy, which found that, despite a 3 percent decline from the previous week, crude-oil inventories totaled 343.9 million barrels, 3.6 percent ahead of last year.

Gasoline inventories, meanwhile, were up 2.1 million barrels. The EIA noted that petroleum product consumption fell by 4 percent last year, which the agency said reflects the effect that hurricanes Katrina and Rita had on gasoline supplies and sales as well as the cooling demand for gasoline in light of record prices that reached $3 per gallon after the hurricanes hit the Gulf Coast.

Motorists reacted to higher gasoline prices by increasing consumption by less than 1 percent through the first quarter of this year, well below the historical pattern of 3 percent annual consumption increases.

The agency's latest prediction for average prices for the remainder of 2006 was set at $2.57 per gallon nationally.

The EIA said gasoline inventories had been buttressed by imported gasoline, attracted by the high prices that motorists have been paying most of the spring.

"Although the combination of refinery maintenance and the phase-out of methyl tertiary butyl ether (MTBE)from the gasoline pool had strained gasoline markets the past several months, these pressures appear to be easing as refinery operations increase and the transition to ethanol-based reformulated gasoline's progresses," the EIA said in this week's report.

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(c) 2006, Fort Worth Star-Telegram.

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Source: Fort Worth Star-Telegram (Fort Worth, Texas)

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