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
gallon.
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.
CONSUMER DEMAND WANES
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
Washington.
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.
