• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Energy Prices Surge to More Records; Oil, Gas Companies Scramble to Assess Damage From Storm

Posted on: Wednesday, 31 August 2005, 18:00 CDT

The potential damage to oil platforms, refineries and pipelines that remain closed along the Gulf Coast drove energy prices to new highs Tuesday, with crude futures briefly topping $70 a barrel and wholesale gasoline costs surging to levels that could lead to $3 a gallon at the pump in some markets.

Companies scrambled planes and helicopters to get an aerial view of their assets and they began escorting some previously evacuated workers back to offshore facilities to conduct detailed inspections of rigs and underwater pipes. Some producers found that a rig or platform had disappeared, drifted or listed, while others reported that damage appeared minimal.

Onshore, flooding from Hurricane Katrina is likely to have caused enough damage to some refineries that it could take weeks, and possibly a month or more, before operations return to normal, analysts said.

Indeed, the production and distribution of oil and gas remained severely disrupted by the shutdown of a key oil import terminal off the coast of Louisiana and by the Gulf region's widespread loss of electricity, which is needed to power pipelines and refineries.

"It's ugly," said Lawrence J. Goldstein, president of the New York-based nonprofit Petroleum Industry Research Foundation. "Power is a problem, but the water issue is unbelievable."

To avert a severe supply crunch, Goldstein said the government should relax summer gasoline specifications to immediately free-up motor fuel supplies otherwise being held in storage until Sept. 15. He said the U.S. should also seek help from European nations, who might be willing to lend, exchange or sell gasoline and other fuels out of their own inventories.

The trading frenzy on futures markets reflected the uncertainty and fear about the full extent of the damage Katrina inflicted, as well as the constraints being felt where actual shipments of gasoline, heating oil and jet fuel are bought and sold.

"This is an extremely serious situation," said Tom Kloza, director of the Wall, N.J.-based Oil Price Information Service.

Light sweet crude for October delivery rose $2.61 to settle at $69.81 a barrel, a record close since trading began in 1983 on the New York Mercantile Exchange. Prices had reached as high as $70.85, an intraday high on Nymex, although still below the inflation- adjusted high of about $90 a barrel that was set in 1980.

September gasoline futures rose 41.39 cents to settle at $2.4745 a gallon on Nymex. Heating oil futures rose 16.71 cents to $2.0759 a gallon.

In wholesale markets on the Gulf Coast, some gasoline was being priced as high as $2.85 a gallon and in the Midwest, prices were as high as $2.65 a gallon, according to Kloza. Retail prices are typically 60 cents higher, meaning motorists in these regions could very well see $3 a gallon at the pump in some markets.

Natural gas futures raced higher as well, foreshadowing higher home-heating bills this winter. Natural gas for October delivery traded at $11.659 per 1,000 cubic feet, an increase of 52 cents.

Some signs of the havoc -Katrina caused:

* Diamond Offshore Drilling Inc. reported one missing rig. Another broke free from its moorings, but it was found about nine miles north of its original location.

* Newfield Exploration Co. said one of its production platforms disappeared entirely.

* Rowan Cos. said it believes a rig capsized and sunk off the coast of Louisiana.

Source: Columbian

More News in this Category