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Gas Prices Continue to Rise as Hurricane Destroys Oil Facilities

Hurricane Ike pulverized the Gulf Coast with maximum winds of about 100 mph and left a wide swath of flooding and devastation in its wake.

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By Nancy Trejos and Spencer S. Hsu
Washington Post Staff Writers
Monday, September 15, 2008

Gasoline prices once again soared across the country yesterday as federal officials said a preliminary survey of damage found that a number of production platforms in the Gulf of Mexico had been destroyed by Hurricane Ike.

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The average price per gallon of regular unleaded gasoline climbed from $3.73 to just shy of $3.80 yesterday, according to the auto club AAA. That followed a 6-cent jump on Saturday, when Ike ravaged the Texas Gulf Coast, home to 23 percent of U.S. oil refining capacity.

Prices broke the $4-a-gallon barrier in seven states, including some as far from the storm's path as Alaska and Hawaii. In some parts of the country, there were reports of gouging, with prices reaching $5 a gallon. A flood of complaints -- more than 549 since Thursday -- led Florida Attorney General Bill McCollum to issue subpoenas to four companies seeking documentation on what they paid for the gasoline they were selling to consumers.

To ease the gas crunch, the U.S. government agreed yesterday to release 309,000 barrels of oil from the Strategic Petroleum Reserve to a Conoco Phillips refinery in Illinois and a Placid Oil refinery in Louisiana because of supply disruptions from the Gulf.

For the second time in two days, President Bush said the government would be on the alert for any exorbitant price increases in the wake of a shortage.

"The federal government, along with state governments, will be monitoring very carefully as to whether or not consumers are being mistreated at the pump -- in other words, gouged," Bush said from the White House.

It was unclear yesterday how badly the storm had crippled the Gulf oil infrastructure. Eileen Angelico, a spokeswoman for the Interior Department's Minerals Management Service, said flyovers Saturday and yesterday showed 10 destroyed oil platforms. There are 717 manned platforms in the Gulf, and as of yesterday 591 of them had been evacuated in anticipation of the storm.

Angelico said the assessment was preliminary and that there were no further details available. The agency was working with oil companies and the Coast Guard to confirm other reports of damage, she said.

Meanwhile, the nation's leading oil companies began returning crews to some of their facilities to assess structural damage. But already, the loss of power to many refineries and pipelines remained a top concern.

"To the extent that we hear that damage is minor, the larger issue is going to be power restoration," said Kevin M. Kolevar, assistant secretary of energy for electricity delivery and energy reliability.

Sen. Kay Bailey Hutchison (R-Tex.) said on CBS's "Face the Nation" that it could take up to nine days for the refineries to get back online and that Americans should expect possible gas shortages.

"We are looking at another week or eight or nine days before refineries are up and going, so refined gasoline is going to be in a shortage situation because of the power outages and flooding," she said.

As of yesterday afternoon, 99.6 percent of the oil production and 91.9 percent of the natural gas production in the Gulf was still shut down, according to the Interior Department. The Gulf of Mexico produces about 1.3 million barrels of oil and 7.4 billion cubic feet of gas per day. Personnel had been evacuated from 92 of the 121 rigs in the Gulf.

However, only four of 17 oil refineries on the Texas coast from Corpus Christi to Beaumont remained closed, six were ramping up and the rest were operational, Kolevar said.

Operators of two major pipelines that serve the Eastern Seaboard, the Plantation and Colonial pipelines, said they were able to resume operations yesterday carrying diesel, heating oil, jet fuel and gasoline from the Gulf Coast at reduced rates.

Exxon Mobil said power was restored to its Baytown facility and that a start-up plan was being developed. Its Beaumont facility remained without power. Bill Day, a spokesman for Valero Energy, the nation's largest refiner, said it would take several days for power to be restored to its Houston, Texas City and Port Arthur refineries. Shell said last night that two of its refineries had not resumed operations while two others were operating on a limited basis.

Nonetheless, assessment crews found no significant structural damage to the Valero facilities. Exxon Mobil said damage appeared to be limited at its Baytown complex. Shell, too, had only moderate damage to some of its facilities, including its Pasadena terminal, which it reopened. Its Houston terminal, however, did sustain some damage and was being assessed further, the company said.


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