Gulf States Close Refineries

September 23, 2005 - 08:58

In anticipation of damage from Hurricane Rita, a number of oil companies in Texas and Louisiana closed oil refineries along the Gulf of Mexico. As of last week, oil companies, including BP PLC, Valero Energy Corp., Shell Oil, Marathon Oil Corp. and Exxon Mobil Corp., all said they were shutting down refineries to lessen the possible damage the hurricane might cause on U.S. oil production, according to the Associated Press (AP) .

“Four Louisiana refineries are still out of operation from last month's Hurricane Katrina. Those plants accounted for about 5 percent of the nation's refining capacity, and the Texas shutdowns are likely to be even larger,” stated the AP .

According to the AP , “Texas has 26 refineries that account for more than one-fourth of the nation's refining capacity, mostly along 300 miles of Gulf Coast from the Louisiana border to Corpus Christi.” The Houston area alone carries about 13 percent of U.S. refining capacity.

Roger Diwan, who studies oil markets for research and consulting company PFC Energy in Washington said to the AP , “even if Rita causes no damage it would take refineries four or five days to start up again — a gap that could strain the nation's supplies of gasoline, jet fuel and diesel.”

Larry Goldstein, president of the Petroleum Industry Research Foundation, added “that precautionary shutdowns would cut refining capacity by more than 3 million barrels of oil a day — about one-seventh of the U.S. total — for a week. Any damage to the plants would compound the loss.”

“Combined, the damage from Katrina and the precautionary evacuations due to Rita have slashed normal Gulf oil production of 1.5 million barrels a day by 73 percent,” the U.S. Minerals Management Service said last week to the AP .

“Since Katrina evacuations began Aug. 26, the storms have cut more than 27 million barrels of oil production, or 5 percent of the Gulf's annual production. Natural gas production was 47 percent below normal on Wednesday,” said the U.S. Minerals Management Service to the AP .

According to market analysts, oil and gasoline prices are in danger of rising again if this latest hurricane causes damage on the refineries. Katrina caused gasoline prices at the pump to spike above $3 a gallon in many parts of the country.

As people raced to leave the Texas coast gas prices had already began to increase slightly (heating oil rose about 3 cents to $2.0387 a gallon and gasoline jumped more than 7 cents to $2.0531 a gallon said the AP .

Since Katrina hit, the United States has been importing gasoline from overseas; however, it is expensive to import the gas, and the United States will need to figure out a way to fix the oil refinery situation problem soon.

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