Katrina Sends Natural Gas, Oil Prices Surging
This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.
Hurricane Katrina disrupted Gulf Coast petroleum output and rattled energy markets yesterday, sending oil and natural gas prices soaring and setting the stage for a spike in the retail cost of gasoline.
By the end of the day, more than 700 offshore platforms and rigs had been evacuated, two rigs had drifted away, and authorities in Alabama were forced to close a bridge over the Mobile River after it was struck by a runaway platform. Oil futures briefly climbed above $70 a barrel for the first time.
The powerful hurricane roiled the industry at a time when producers worldwide were already struggling to keep up
with strong demand, and it threatened to constrain the supply of home heating fuels this winter. The rise in energy prices has already slowed the American economy’s growth rate, though domestic fuel consumption is still rising.
The Bush administration said it would consider lending oil from the nation’s emergency stockpile to refiners that request it – Citgo Petroleum Corporation asked for 250,000-500,000 barrels to ensure its Lake Charles, La., refinery does not run out – and the president of OPEC said he will propose a production increase of 500,000 barrels a day at the cartel’s meeting next month. Analysts nervously awaited details on the extent of the damage to the region’s platforms, pipelines, refineries, and electric grid.
“We’re losing a lot of crude oil and also a lot of natural gas,” the president of the New York-based nonprofit Petroleum Industry Research Foundation, Lawrence Goldstein, said. Mr. Goldstein estimated that total refinery production of gasoline, heating oil, diesel, and other fuels could fall by as much as 20 million barrels over the next 60 days.
Wholesale gasoline prices in the New York and Gulf Coast markets soared by 25-35 cents a gallon yesterday following reports that more than 8% of American refining capacity had been shut down as a precaution ahead of the storm. One analyst said pump prices nationwide would likely average more than $2.75 a gallon by week’s end – up from $2.61 a gallon last week, according to Energy Department data released yesterday.
“Unfortunately, I don’t think $3 a gallon is a hyperbolic number in some markets anymore,” said analyst Tom Kloza of Wall, N.J.-based Oil Price Information Service. He emphasized that the market reaction is a reflection of supply tightness, not shortages.
The Gulf of Mexico normally produces 2 million barrels of crude oil a day, or about 35% of America’s domestic output, according to government and industry data. About 10 billion cubic feet a day of natural gas is produced in the region.