New Storm Could Slam Gas Prices Worry Over Rita Causes the Biggest One-Day Price Jump Ever for a Barrel of Oil.
Posted on: Tuesday, 20 September 2005, 21:00 CDT
A recent dip in gas prices could be short-lived, with another storm threatening to slam Gulf Coast oil refineries.
Gasoline prices may rise and could possibly approach levels recorded earlier this month following Hurricane Katrina, said Rose White, spokeswoman for AAA Nebraska.
Gas prices in Nebraska, Iowa and other parts of the country hit $3 and higher after Hurricane Katrina knocked out Gulf Coast refineries.
Whether prices go that high this time hinges on what happens with Tropical Storm Rita. If the storm intensifies and continues on its current path, that could cause refineries to shut down, White said.
Long-range forecasts predict that the system will move into the Gulf of Mexico on Wednesday as a hurricane, then possibly approach Mexico or Texas late in the week. But forecasters warned that long- term predictions can be unreliable.
If Rita strikes Texas, the biggest oil refiner in the country, the industry could see serious disruption.
Texas has 26 petroleum refineries, most of which are along the coast, with the capacity to pump 4.6 million barrels a day. That's more than a quarter of the total U.S. refining capacity, according to the U.S. Department of Energy.
Gas prices in Nebraska and Iowa have been dropping for more than a week.
In Omaha, prices for regular unleaded gasoline have fallen to about $2.60 per gallon and lower. Prices reached as high as $3.40 in Omaha after Katrina hit three weeks ago.
The average price Monday for regular unleaded was $2.72 in Nebraska and $2.70 in Iowa.
Crude-oil futures surged Monday more than $4 -- the biggest one- day price jump ever -- amid worries that Rita could hit U.S. oil facilities in the Gulf of Mexico, striking another blow to an industry struggling to recover from Katrina.
Crude oil for October delivery rose $4.39, or 7 percent, to settle at $67.39 a barrel Monday on the New York Mercantile Exchange.
"The main driver today is Tropical Storm Rita," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago. "We really can't afford to lose more production.''
Forecasters said Rita could be a Category 2 hurricane with 100 mph winds by this afternoon, dumping up to 15 inches of rain on the lower Florida Keys and producing a 6- to 8-foot storm surge.
By Wednesday morning, Rita was projected to be in the Gulf of Mexico, where warm waters could boost it into a Category 3 or a Category 4 hurricane. Forecasters said Rita could be near Mexico or Texas by the weekend, with a possibility that it could turn toward Louisiana.
About 55 percent of oil production and 35 percent of gasoline production in the Gulf of Mexico remains blocked in the wake of Katrina, the Minerals Management Service said Monday.
The swells in crude, heating oil and gasoline futures came as OPEC ministers met to discuss how to relieve price pressures in the oil market.
Heating oil futures surged more than 20 cents to $2.0384 a gallon. Gasoline futures rose nearly 26 cents to $2.0427 a gallon.
Natural gas futures also soared Monday, rising $1.519 to settle at a new high of $12.663 per million British thermal units.
OPEC ministers sought to reassure oil markets that supplies are plentiful. The ministers appeared near agreement to make 2 million extra barrels of oil a day available -- a move aimed at easing fears over an expected spike in demand as the winter heating season approaches.
They were to decide today whether to offer the extra oil or boost the current output ceiling of 28 million barrels a day by 500,000 barrels.
Previous OPEC pledges have done little this year to stabilize prices, which spiked on concerns that there is little spare crude left from rising demand. But officials and analysts have also blamed high prices on the lack of refinery capacity to process products.
This report includes material from the Associated Press and Bloomberg News.
Source: Omaha World - Herald
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