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Storm Takes Toll at the Pump, Curbs Energy Production

By Nancy Trejos and Spencer Hsu
Washington Post Staff Writers
Sunday, September 14, 2008

It didn't take long for consumers to feel the impact of Hurricane Ike at the gas pumps.

Nationwide, the average price per gallon of regular unleaded gas jumped to $3.73 yesterday from $3.68 the day before, as about a quarter of U.S. energy production remained out of commission.

In the District, the price climbed from $3.68 to $3.74. In Maryland, it was $3.57, compared with $3.52 the day before. And in Virginia, it soared from $3.54 to $3.63.

Across the country, particularly near the storm's path, there were reports of price gouging as retailers wondered when their next shipments would arrive. John B. Townsend II, a spokesman for AAA Mid-Atlantic, said some areas saw gas prices climb by as much as $1 because of the shutdown of offshore platforms and drilling rigs along the Gulf of Mexico and oil refineries. There were reports of prices topping $4 in the Carolinas, he said.

Along the Gulf Coast, "prices have jumped in some cases to $5, and that's unconscionable," he said.

Nonetheless, Townsend said consumers should not be surprised if gas prices reached record highs, as they did over the summer. "I think that for some consumers, depending on where they are, in time you may see the return of $4 gas," he said.

In brief comments at the White House yesterday morning, President Bush warned against price gouging.

"The Department of Energy, the Federal Trade Commission and, I know, state authorities will be monitoring gasoline prices to make sure consumers are not being gouged, make sure consumers are being treated fairly," he said.

The nation's leading oil producers, including Exxon Mobil and Shell, said it was too early to assess the damage to its refineries and other operations, but power outages were proving to be a vexing problem for refiners all across the region. For instance, Valero Energy, the nation's largest refiner, reported that power was out at its Houston, Texas City and Port Arthur refineries, which it had closed in anticipation of the storm. The company said last night that assessment crews found no significant structural damage to the facilities.

The storm also led to the shutdown of several pipelines, including Colonial Pipeline, which transports fuel from the Gulf Coast through cities along the Eastern Seaboard, including some in central Virginia and Maryland. Steve Baker, a spokesman for Colonial, said that the company's Houston area stations had lost power and that two pipelines, one carrying gas and one carrying distillates such as diesel fuel and home heating oil, were shut down.

The Interior Department's Minerals Management Service said it had confirmed reports of two drilling rigs adrift in the central Gulf of Mexico. The agency, along with the U.S. Coast Guard, was monitoring the paths of the rigs.

The latest disruption comes on the heels of Hurricane Gustav, which also forced oil companies to curtail production.

"The problem is we don't really know how long it will take to get the refineries back up because of so many power outages," said Edward L. Morse, managing director and chief energy economist at Lehman Brothers.

The storm illustrated the region's significance to the nation's oil supply. About 40 percent of U.S. oil refining capacity lies along the coast, with about 23 percent along the Texas Gulf Coast.

As of yesterday afternoon, 99.7 percent of the oil production and 98.5 percent of the natural gas production in the gulf were shut down, according to the Minerals Management Service. Oil production from the gulf is estimated at 1.3 million barrels per day, while natural gas production is estimated at 7.4 billion cubic feet per day.

Personnel had been evacuated from 611 production platforms, or 85.2 percent of the manned platforms in the gulf, and from 101 rigs, or 83.5 percent of the rigs.

Officials from the Energy Department said 14 of 17 oil refineries on the Texas coast between Corpus Christi and Beaumont were shut down, and the rest were on reduced runs.

Concerned about gasoline availability and prices, Bush said the Environmental Protection Agency has temporarily waived some provisions in 12 states across the region so that they can import gasoline from abroad that normally would not meet some U.S. requirements.

U.S. officials said hurricanes Ike and Gustav landed a weaker one-two punch against the nation's energy and petrochemical sector than Katrina and Rita delivered in 2005.

This year's Gulf Coast hurricanes were more threatening because they came over a span of 12 days, rather than 26 days, hitting a weakened infrastructure still limping back to production.

But the storms were weaker, industry preparations were stronger, and many of the most vulnerable offshore facilities damaged in 2005 were not restored, said Kevin P. Kolevar, assistant secretary of energy for electricity reliability and energy delivery.

"I can't think of any estimate or damage as to offshore facilities that caught my attention," Kolevar said. He added: "We didn't have the kind of damage [from Gustav] to the refinery sector that we did from Rita, and they have been recovering faster than they did in 2005."

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