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

Soaring Energy Bills Expected to Keep Rising for Months, Say Government Officials

Posted on: Wednesday, 19 October 2005, 15:01 CDT

By Slawsky, Richard

Damage to oil and gas drilling equipment, pipelines and refineries in the wake of hurricanes Katrina and Rita mean prices for oil, natural gas and gasoline likely will remain at record levels for the foreseeable future, according to government officials.

Of the 4,000 manned and unmanned drilling platforms administered by the Department of the Interior's Minerals Management Service, 3,050 were in the path of one or both storms, according to MMS officials. According to the MMS's preliminary assessment, 109 platforms, all but one built before 1988, were destroyed.

Nearly 87 percent of oil production and 69 percent of natural gas production remained offline last Wednesday, more than a week after Hurricane Rita swept through the Gulf. At least 304 of the 819 manned platforms and seven of the 134 rigs operating in the Gulf remained evacuated.Pipeline damage was less than what occurred last year during Hurricane Ivan, MMS officials said. However, a complete assessment hasn't been made, they said.

Damage from the storms will most likely mean natural gas production won't return to normal for months, Norton said. Although that will mean higher prices, there shouldn't be widespread shortages, she said. Repairs to drilling equipment could run into the billions, she said.

Natural gas futures closed at a record high of $14.22 per 1,000 cubic feet last Tuesday; double what it was selling for a year ago. About 20 percent of the natural gas used in the United States is produced in the Gulf of Mexico.

Officials from Dallas-based Atmos Energy, which supplies natural gas to much of South Louisiana, said residential natural gas could be approximately 60 to 90 percent higher than gas bills last winter because of the storms.

Customers pay only what Atmos Energy pays for natural gas and not a penny more, said Atmos spokesman Dick Erskine. We buy the gas on behalf of customers. We simply pass the cost of the gas on to our customers with no markup.

Gasoline prices also are expected to rise in the coming months as demand picks up, according to Department of Energy officials. For the week ending Sept. 30, inventories of gasoline, distillate fuel and jet fuel fell a combined 12.6 million barrels, according to the EIA. The drop in gasoline inventories came despite a record level of imports as well as refiners and blenders making as much gasoline as they possibly could.

Gasoline prices averaged $2.83 per gallon last week, up 13 cents from the previous week and up 99 cents from this time last year.Diesel prices rose even further, averaging $3.14 per gallon last week a record high even adjusting for inflation. Prices were up 35 cents from the previous week and up $1.09 from this time last year, and the EIA expects diesel prices to rise even higher in October.

Approximately 18 percent of U.S. refining capacity remains idled by hurricane damage. The Department of Energy reports 3 million barrels per day of capacity is offline. The shutdowns include four refineries damaged during Hurricane Katrina nearly six weeks ago, seven Port Arthur, Texas-area refineries hit by Hurricane Rita as well as BP's 437,000-barrel-per-day refinery in Texas City, Texas.

Six Louisiana refineries remain shut down, including Chalmette Refining and Murphy Oil in Chalmette, ConocoPhillips in Alliance, Valero in Krotz Springs, and the Citgo and ConocoPhillips refineries in Lake Charles.

Crude oil inputs into refineries averaged just 11.7 million barrels per day last week, the lowest average since the week ending March 13, 1987, and over 4.5 million barrels per day less than the week before Hurricane Katrina began to impact refinery operations, the Energy Information Administration said in its weekly report on the petroleum industry. With the continued shutdown of a significant amount of refinery capacity, less product is being refined, and the result is that inventories will be drawn down in order to provide as much supply as possible to the product markets.

(Copyright 2005 Dolan Media Newswires)

Source: New Orleans CityBusiness

More News in this Category