Gas Prices Start to Rise in Rita's Wake

By Justin Blum
Washington Post Staff Writer
Tuesday, September 27, 2005

Gasoline prices at the pump are edging higher after Hurricane Rita but are expected to start easing in several weeks as demand softens and damaged refineries begin operating again, analysts said.

With the largest U.S. refineries temporarily shut down because of the hurricane, analysts said prices probably would climb to about $3 for a gallon of regular. But prices should not spike as sharply as they did after Hurricane Katrina because damage to refineries appeared less severe, demand has eased slightly and imports of gasoline are increasing, they said.

The national average for a gallon of regular was $2.80 yesterday, up about 5 cents from before the hurricane, according to AAA. Pump prices had been receding after the worst of the Katrina impact had passed. Gasoline futures prices rose about 4 cents yesterday on the New York Mercantile Exchange, foreshadowing more increases at the pump.

"It looks like things will go a little higher -- right around $3 a gallon," said Tom Kloza, an analyst with Oil Price Information Service in Wall, N.J., which conducts the price reports for AAA. "But it's not going to happen at light speed like it did last time with Katrina."

Kloza predicted gasoline prices would remain high until mid-October. By then, as refinery operations return to normal and other market conditions change, prices should start to decline.

Meanwhile, the oil industry continued to assess damage to refineries in Texas and Louisiana and to offshore oil and natural gas platforms.

About 26 percent of the country's ability to produce gasoline, jet fuel and other oil products remained out of service yesterday because of precautionary refinery shutdowns in advance of Rita and plants idled by Katrina, according to the Energy Department. Some refineries were beginning to restart yesterday, a complex process that can take several days to a week. Some were repairing minor damage before they could restart.

The refinery with the most damage appeared to be Valero Energy Corp.'s facility in Port Arthur, Tex., which is expected to be down between two weeks and a month. That refinery represents about 1.5 percent of the nation's capacity.

Several other refineries along the Gulf Coast remained without power, which is needed to restart.

"The refining industry has been hit a couple of pretty solid blows by Katrina and Rita," said Benjamin W. Sebree, vice president for governmental affairs at the Texas Oil and Gas Association in Austin.

Even before Rita struck over the weekend, gasoline supplies were tight. About 5 percent of the country's refinery capacity remained idle from Katrina.

The industry was assessing damage to offshore platforms. Chevron Corp. reported "severe damage" to its Typhoon platform, which handles less than 3 percent of the company's Gulf oil and natural gas production, and the company said it was continuing to assess damage to production in other parts of the Gulf.

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