NEW YORK (AFP) — Hurricane Ike, bearing down Friday on the Texas coast, is pressuring US refining capacity at a time when gasoline stockpiles are low, signaling higher prices at the pump for American consumers.
Although crude oil production from the offshore rigs in the Gulf of Mexico has been almost shut down, after the evacuation of workers, Ike's forecast path appears likely to spare them.
"The threat of the storm to the oil industry is going to be more to the refineries than to the offshore rigs," said Phil Flynn, an oil sector analyst at Alaron Trading.
The massive storm is expected to strike later in the day or early Saturday dead-center on Galveston, the coastal city nearest Houston, the nation's refinery capital.
According to data provided by Texas-based oil industry expert Andy Lipow, the nine refineries in the Houston area, as well as the four refineries around Beaumont and Port Arthur, have been evacuated of their workers and shut in.
Those 13 refineries represent a combined capacity of 3.7 million barrels of crude oil per day, a fifth of US refinery capacity.
Most of them are operated by US firms ConocoPhillips, ExxonMobil and Valero, while some are run by Anglo-Dutch Shell and Total of France.
After Hurricane Ike leaves, it will take at least 10 to 14 days to restart refinery production, once workers return to the sites and electricity is restored, Lipow said.
And if there are damages, restoration of service could take several months, the analyst said.
Following the devastating back-to-back hurricanes Katrina and Rita in 2005, it took nearly nine months for normal operations to resume at all the affected refineries.
US weather forecasters have predicted a storm surge will flood the Galveston area.
"Over an 18-feet storm surge there will be significant flooding to several refineries," Lipow said.
Fears about what damages Ike could wreak were heightened by concerns about the aging refineries, some of which have been operating for more than 75 years.
The threat to the refinery industry along the Gulf coast comes as gasoline stockpiles -- at 187.9 million barrels on August 5 -- are below the average level for this time of year, the US Department of Energy said Wednesday.
At their lowest level since 2000, gasoline reserves could fall in the coming weeks to an 18-year low, Lipow said.
They already have shrunk after Hurricane Gustav struck the Gulf of Mexico a little more than a week ago, temporarily shutting in more than 10 percent of refinery capacity.
Bottom line: "Gasoline supplies are going to remain tight for several months, especially east of the Rockies," said Lipow.
Gasoline prices have already begun to climb.
On the coast of the Gulf of Mexico, wholesale gasoline prices leapt more than five dollars a gallon.
"Panic buying set in the cash market and we saw the biggest surge in Gulf Coast wholesale prices since the 1970s," said Alaron's Flynn.
The national average gasoline price last week was 3.648 dollars a gallon, and 3.551 dollars in the Gulf of Mexico region, according to the DoE.
Prices at the pump hit a record-high 4.11 dollars in July.
"Nationwide, I believe prices will go up 20 cents a gallon (3.78 liters), at least for a month," Lipow said.
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