Damage to Refineries May Cause Gas Prices to Rise

By Alan Fein

Houston - Consumers may be looking at higher prices at the pump shortly due to damage sustained at two Texas gasoline refineries due to hurricane Rita. Hurricane Rita seriously damaged two major refineries in Port Arthur, Texas, and may have damaged as many as four more in Texas and Louisiana.

Last month four gas refineries were idled following hurricane Katrina in Louisiana that supplied 5 percent of the nation's gasoline. But hurricane Rita may have caused even more refinery damage than that.

According to AAA, the average price for a gallon of regular gasoline is $2.778. A month ago, AAA reported that average price for a gallon of gasoline was $2.603, a 17 cent a gallon difference consumers were paying at the pump. But with more gas refineries estimated to be damaged in the wake of hurricane Rita, gas prices are apt to rise even further.

Analysts estimate that for the next two or three weeks gas prices are most likely going to rise due to the damage to refineries, though the degree of damage has yet to be determined.

In Houston, refineries there seemed to have escaped damage from hurricane Rita. Houston-area refineries produce about 13 percent of the nation's gasoline.

A department of energy spokesperson told the media that they were "cautiously optimistic" about the amount of damage to gasoline refineries and shipping ports in the Houston area. Though other refineries were another matter. "Those around Port Arthur seem to have borne the brunt of the storm, and we will wait for additional reports and assessments from that area," the spokesperson said.

Refineries in Beaumont, TX and Lake Charles, LA were directly in the path of hurricane Rita and suffered the strongest winds and worst flooding.

ExxonMobil, which operates a large gasoline refinery in Beaumont with a 348,000 barrel per day capacity has yet to report damage estimates.

Citgo and ConocoPhillips, which operate gasoline refineries in Lake Charles with capacities of 324,000 and 239,000 barrels a day have not reported the extent of damage to their refineries either.

Shell Oil reported that its refinery in Port Arthur suffered minor damage but it's Motiva terminal was already operating yesterday to supply gasoline to stations along Houston's evacuation routes as well as emergency vehicles.

Gasoline pipelines that feed the Southeast and Midwest had been closed down prior to hurricane Rita reaching land. Colonial Pipeline Company said its gasoline pipeline escaped damage. Colonial supplies much of the gasoline for the Southeast.

Explorer Pipeline Co. said its gasoline pipeline to the Midwest suffered no damage though its pumping station in Houston was experiencing power outages.

While the major pipelines to the Midwest and Southeast escaped damage, they cannot provide fuel to those markets until the refineries begin supplying gasoline once again.

Offshore oil platforms have yet to have damage assessments reported as well. Both onshore refineries and oil rigs in the Gulf will require some repair. At this time no estimates can be provided by the Department of Energy or the energy companies themselves. Accurate estimates may take a week or longer to compile.