Staff and wire reports
Crude-oil prices spiked to a new high Tuesday, as traders grew increasingly concerned about the amount of damage Hurricane Katrina did to the nation’s energy infrastructure.
The runup in trading prices doesn’t directly affect consumer prices, but the market’s jittery climb suggests U.S. consumers are about to see another surge in gasoline prices — and it’s already happening in eastern New Mexico.
The average price of regular gas in the region on Monday morning was $2.49 per gallon. That average was up to $2.69 by Tuesday.
Clovis resident Aaron Rodriguez filled up his Toyota Camry on Tuesday evening. “I can’t believe these prices,” he said. “I can only afford half a tank.” Rodriguez also said he and his family have had to alter their budget due to the prices. “We have cut back in other ways, like eating out,” Rodriguez said.
The trend is happening across the nation, or soon will, experts said.
“We are certainly going to see higher gas prices this week,” said Justin McNaull, a spokesman for AAA. “It is hard to tell how much they will go up.”
The auto club is asking that motorists avoid unnecessary driving to conserve gasoline supplies.
Late Tuesday, oil companies were still assessing the state of their offshore drilling platforms, the vast system of pipelines that pump petroleum ashore, and the refineries that convert crude into gasoline, jet fuel, and heating oil.
Fearful that domestic production may be crimped for several weeks or months at a time when the system was already straining to meet demand, traders bid the October future for crude oil up $2.61 to a record-high close of $69.81.
The hurricane’s blow to the nation’s energy midsection comes at a time when U.S. refineries have been running flat-out to keep up with demand.
While engineers from big oil companies flew over half-flooded refineries looking for damage Tuesday, some industry observers were predicting petroleum could soar to $80 a barrel.
“People are extremely nervous,” said Russell Lundeberg Jr., chief investment officer of Barrett Capital Management, said. In the trading community, he noted, “Emotional decisions can definitely cause extreme price levels.”
At the most fundamental level, the hurricane has pinched the nation’s supply of home-grown production.
As Katrina approached the Gulf Coast over the weekend, oil companies shut down and evacuated hundreds of production platforms and drilling rigs.
Those shutdowns eliminated 1.37 million barrels, or 92 percent, of the Gulf oil fields’ daily production of 1.5 million barrels of oil per day, said federal officials; hurricane-related closures also took 83 percent of the area’s natural-gas production offline.
The impact will be significant: the Gulf Coast area where Katrina struck pumps about one of every three barrels of oil produced in the United States.
The storm also forced the closure of the Louisiana Offshore Oil Port, the nation’s largest facility for receiving tankers carrying imported oil.
“This is an extremely serious situation,” said Tom Kloza, director of the Wall, N.J.-based nonprofit Oil Price Information Service.
Potentially even more damaging to the nation’s energy picture, however, is the possibility that Katrina’s winds and floods have caused long-lasting damage to Gulf-area refineries.
At least eight refineries have either shut down or curtailed production, reducing the nation’s total refining capacity by 8 percent to 10 percent.
How long those facilities will be shuttered remains unclear. In wholesale markets on the Gulf Coast, gasoline was priced as high as $2.85 a gallon; in the Midwest, prices were as high as $2.65. Because retail prices run about 60 cents above wholesale, if those wholesale rates holds consumers in those areas will probably be paying above $3 a gallon for gas in coming months, if not weeks.
Unless there’s a rapid reversal of the wholesale price for gasoline, noted High Frequency Economics economist Ian Shepherdson, “retail (gas) prices — which appeared to have peaked before the storm — are set to leap again.”