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Katrina's turbulence in gulf impacts nation's gas and oil operations, prices



Published: Mon, August 29, 2005 @ 12:00 a.m.



Even if pipelines and tankers are not hit, shutdowns will cause disruptions.

KNIGHT RIDDER NEWSPAPERS

MIAMI -- New Orleans stood dead in the path of Hurricane Katrina, but the entire nation will feel the brunt of the powerful storm if oil and gas operations in the gulf get whacked.

Roughly 30 percent of the oil and gas consumed in the United States flows along pipelines or is hauled in on tankers and barges in the Gulf Coast.

Soaring costs

A major hit would disrupt fuel shipments and send prices soaring even higher right before the Labor Day holiday, when more than 34 million Americans are projected to hit the road.

Gas prices already are up an average 83 cents a gallon this year. Analysts predict that fears of a shortage caused by Katrina could drive crude oil prices, which traded at around $66 a barrel on Friday, to as high as $70 this week. Every additional $1 per barrel translates into more than 2 cents in the price of a gallon of gasoline.

"Monday morning, take every penny in your wallet and invest in oil, because the hurricane is projected to come in in the heart of the gas and oil port," said Ted Falgout, director of Port of Fourchon, a key oil and gas hub that sits 60 miles south of New Orleans on the Gulf of Mexico. "Prices are going to go up."

Florida in particular would feel the impact: As much as 90 percent of the state's gasoline arrives by ship from oil refineries along the Mississippi River.

Gov. Jeb Bush warned that the fuel supplies at Florida ports, which seemed ample on Friday, now will not be enough in view of an expected shutdown of the refineries off the Louisiana coast.

"There are localized fuel shortages, and my expectation is those will continue," he said. "We're encouraging people to use fuel responsibly and leave fuel for their neighbors."

"It's not going to be pretty," said Jim Smith, president of the Florida Petroleum Marketers and Convenience Store Association. "We're totally dependent on that water-borne route."

Causes for disruption

Smith and other experts said Katrina risks damaging three key links in Florida's fuel-supply chain:

U The region's oil production comes to a halt, crimping the normal flow of crude. Off-shore oil rigs pump crude oil from the floor of the Gulf of Mexico -- 1.5 million barrels a day, the equivalent of what we bring in from Saudi Arabia. And much weaker hurricanes have caused lasting damage to the metal structures. In fact, some are still off-line from Ivan last year and from Dennis, which hit in July.

U Imported oil can't get into the ports. New Orleans is a key southeast port with facilities to accept super-tankers , making it an important source of foreign crude. Much of that fuel is pumped from off-shore platforms to New Orleans through underwater pipes.

URefineries, which convert crude oil into gasoline and diesel fuel, are hampered from operating. Refineries in Louisiana, Alabama and Mississippi all are imperiled by Katrina, and most have likely already shut down production in order to brace for the bad weather.




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