<!--:es-->Rita seen pushing pump price over $3<!--:-->

Rita seen pushing pump price over $3

Oil companies cut operations, evacuated offshore workers and braced for Rita's worst as the hurricane and its 150-mile per hour winds swirled through the Gulf of Mexico

WASHINGTON – Hurricane Rita will likely

push U.S. retail gasoline prices over $3 a gallon again, but

the spike at the pump will not be as sharp as after Hurricane

Katrina, oil analysts said on Wednesday.

Oil companies cut operations, evacuated offshore workers

and braced for Rita’s worst as the hurricane and its 150-mile

per hour winds swirled through the Gulf of Mexico. The region

accounts for about one-third of U.S. crude oil output.

Valero Energy Corp., said Rita could be a «national

disaster» for U.S. crude oil production and refining.

«If it hits the refineries, and we’re short refining

capacity, you’re going to see gasoline prices well over $3 a

gallon at the pump,» said Valero Chairman Bill Greehey.

Federal officials said as many as 18 Texas oil refineries,

representing nearly one-fourth of U.S. refining capacity, stand

in Rita’s projected path. Computer models forecast Rita would

strike Saturday about 100 miles southwest of Houston.

The storm comes just three weeks after deadly Hurricane

Katrina damaged dozens of rigs, platforms and refineries near

the Louisiana and Mississippi coasts.

«The damage left in Katrina’s wake made the already

troubling supply and price situation significantly worse,» said

Bob Slaughter, president of the National Petrochemical and

Refiners Association, in testimony to a U.S. Senate committee.

Analysts did not expect Rita, upgraded to a Category 4

hurricane on Wednesday, to have the same impact on U.S. retail

gasoline prices as Katrina.

A week after Katrina, the national retail price for regular

unleaded gasoline jumped 46 cents to a record $3.07 a gallon,

nipping at the inflation-adjusted high of $3.12 in 1981.

The average retail price has since fallen to $2.79 a


Jim Ritterbusch, president of Ritterbusch and Associates,

said retail prices could bounce back above $3 after Rita, but

will not be sustainable. «After Katrina, we’re better equipped

to analyze the potential for Rita and I don’t think the upside

response will be as exaggerated,» he said.

Dave Costello, a U.S. Energy Information Administration

analyst, said prices will soon slide well below $3 as many oil

facilities damaged by Katrina return to normal. «We think

gasoline prices ought to average $2.50 a gallon or less by

November or December,» he said.

Even under the worse case scenario, three analysts said

they did not see retail gasoline prices above $4 a gallon.


Bill O’Grady, analyst with A.G. Edwards, said prices may be

tempered by faltering demand. «We could see hordes of people on

bicycles,» he said. «We just don’t know because we’ve never

been there.»

Current fuel prices have already stunted demand. The U.S.

government said gasoline demand in the last month fell 2.1

percent from the year-ago period to 9 million barrels per day.

Analysts also said refiners would do everything possible to

keep prices affordable to mute growing criticism from


Democratic governors and lawmakers have asked Congress to

pass legislation that would define gasoline profiteering,

impose tough penalties for any violations, and limit companies

from boosting gas prices during a major supply disruption.

«Gas and oil prices are skyrocketing in our country,» said

House Democratic Leader Nancy Pelosi. «Some people have to work

two more hours a day to cover the cost of the gas that takes

them to work.»

The Federal Trade Commission said it was investigating

allegations of profiteering after Katrina.

«The FTC will proceed aggressively against any violations

of the antitrust and consumer protection laws that it

enforces,» John Seesel, FTC associate general counsel, told a

Senate Commerce Committee hearing on gasoline prices.

U.S. oil companies say higher prices simply reflect market

demand and the supply disruption. Four Gulf Coast refineries

remain out of service, and three will be offline for months.