Gas price trends after Katrina

The article copied below is from the 31 August 2005 edition of
[url]http://www.Bloomberg.com[/url] . Prospects: ~$3.20/gallon in the face of
suppliers' rationing that has already begun.

Brent
"No matter how cynical you get, it is impossible to keep up."
-- Lily Tomlin



Oil Rises, Gasoline Reaches Record as Katrina Forces Rationing

Aug. 31 (Bloomberg) -- Crude oil rose above $70 a barrel and gasoline
reached a record for a third day after Hurricane Katrina paralyzed U.S.
oil output, refining and imports along the Gulf of Mexico coast,
forcing wholesalers to ration fuel.

Oil and natural gas platforms were shut for a fourth day, sending
natural gas prices to a record as well. Eight refineries in Louisiana
and Mississippi, accounting for more than 10 percent of U.S. refining
capacity, were closed by the approach of Katrina, the most powerful
storm to strike the Gulf coast since 1969.

``You have an oil market that is quite tight in the products side,
particularly in the U.S.,'' said Robert Mabro, president of the
U.K.-based Oxford Institute for Energy Studies. ``Then you have a
hurricane which closed eight refineries. The market looks at the
situation and realizes supplies are even tighter. Prices will only fall
if demand declines.''

Crude oil for September delivery rose as much as 84 cents, or 1.2
percent, to $70.65 a barrel on the New York Mercantile Exchange, where
it was up 57 cents at 11:05 a.m. London time. Oil has jumped 67 percent
in the past year, after reaching a record $70.85 yesterday.

Gasoline for September rose as much as 3.4 percent on Nymex to an
all-time high of $2.57 a gallon after surging 21 percent yesterday.
Natural gas reached a record $12.30 per million British thermal units
and was trading up 3.8 percent at $12.099.

Hundreds Dead

Katrina's death toll may reach into the hundreds. Looting broke out in
New Orleans, where the National Guard patrolled the streets in a bid to
preserve order. Gasoline and diesel tanks ran dry at some terminals in
the Midwest, South and Southeast as refiners and wholesalers across
most of the U.S. started rationing deliveries to filling stations and
convenience stores.

BP Plc, Royal Dutch Shell Plc and other oil companies sent helicopter
crews to assess damage to the nation's most important oil and gas
producing region. Shell said its Mars platform, which can pump 15
percent of the U.S. Gulf's crude oil, was damaged by Katrina on Aug.
29.

U.S. gasoline prices at the pump yesterday rose to a record, averaging
$2.619 a gallon, according to the AAA. They are set to rise further as
the price surge caused by the hurricane filters through to retail
prices.

In the past five years, pump prices have averaged about 62 cents higher
than Nymex futures, Bloomberg data show. Based on today's record
futures price, the average cost to U.S. consumers may reach $3.19 a
gallon.

Wholesale gasoline prices surged 68 cents, or 28 percent, to $3.1245 a
gallon yesterday at Gulf Coast terminals, according to data compiled by
Bloomberg. In Chicago, wholesale prices jumped 61 cents to $2.9497 a
gallon.

Refineries Shut

The total refining capacity shut is at least 1.79 million barrels a
day. The cumulative loss in refined products may be at least 30 million
barrels a day, or a day and a half of U.S. demand, said Deborah White,
an economist at Societe Generale SA.

``Even if there's no damage, it's going to take at least two weeks for
refineries to come back,'' White said in an interview from Paris.
``It's at least as serious as Hurricane Ivan, which we had last year.
And it took six months to get production back to normal in that case.''

Oil prices gained 22 percent in the month after Hurricane Ivan damaged
oil rigs, ripped up undersea pipelines and blocked with silt the ports
oil companies use to supply and maintain facilities in the Gulf.

Gulf Production

U.S. production in the Gulf of Mexico is usually about 1.5 million
barrels a day, according to the country's Minerals Management Service.
Adding the 3.5 million barrels a day Mexico pumps in the region brings
the total to 5 million barrels a day, or about 6 percent of global
output.

The disruptions caused by Katrina may make it harder for refiners to
stockpile winter fuels in preparation for a fourth- quarter peak in
demand.

U.S. crude stockpiles probably rose by 1 million barrels last week,
before Katrina pounded the Gulf, according to the median forecast of 14
analysts surveyed by Bloomberg. Distillates, mostly winter fuels
including heating oil and diesel, may have increased by 1.5 million
barrels. Gasoline supplies probably dropped by 1.63 million barrels.

The U.S. Energy Department will publish its weekly report on petroleum
inventories at 10:30 a.m. Washington time.

To contact the reporters on this story:
Alejandro Barbajosa in London at [email]abarbajosa@bloomberg.net[/email];

Last Updated: August 31, 2005 06:35 EDT