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Gulf Coast Oil Refineries Shut Down by Hurricanes Struggle to Resume Normal Operations

At least three oil refineries in the U.S. Gulf of Mexico region remain shut down as a result of damage sustained from hurricanes Katrina and Rita. Continued storm activity in the Gulf has further disrupted the energy industry, but, gasoline prices have eased a little in recent weeks.

Gasoline prices at the pump have fallen about 16 percent in the past month, according to the AAA Travel Club. But fuel prices are still about 15 cents-a-liter higher than a year ago. The high price has caused some motorists to curtail their time on the road and that, combined with the seasonal slowdown in driving that always comes at summer's end, has helped keep the prices falling.

But prices are unlikely to fall much further. Crude oil, which counts for more than 40 percent of the price of gasoline, remains above $60 a barrel and supplies of gasoline remain somewhat tight because of the refinery shutdowns.

Bob Tippee, editor of Oil and Gas Journal, says most refineries in Louisiana and Texas affected by the hurricanes are now either back online or close to being back. But, he says, facilities that suffered heavy damage will take longer to recover. "In many cases with Katrina the problem was flooding, which flooded electric motors, of which there are many in a refinery. In many cases, those have to be replaced and that takes a while. Also, with both these storms, you had workers who were scattered and evacuated and it takes some time to get them back," he said.

Mr. Tippee says energy companies estimate the refineries closed by the hurricanes will all be back online by sometime in December. In the meantime, he says, many U.S. motorists are using gasoline shipped over by tankers from refineries in Europe. "Europe does have a significant amount of gasoline available for export and a lot of that does come to the United States whenever the price is high here relative to there and that certainly is the case now as a result of the storms. So that is a comfortable buffer supply of gasoline," he said.

During the worst part of the hurricane disasters, as much as 25 percent of U.S. refining capacity was closed down. The refineries that remain closed today account for only about six percent of the nation's capacity.

Crude oil production in the Gulf of Mexico has also slowed as a result of the storms. Hurricanes Katrina and Rita destroyed 113 oil and gas production platforms in the Texas-Louisiana coastal region.

Last week, oil rigs in the eastern Gulf area were evacuated when Hurricane Wilma passed through on its way to Florida. As of Monday, storm-related problems had closed down nearly 68 percent of the Gulf of Mexico's crude production capacity. More than half the region's natural gas production was also shut down.

Energy analysts say natural gas and heating oil prices in the United States are likely to rise as winter weather arrives in the northern part of the country. They say any relief from high gasoline prices could be more than offset by the higher cost of heating homes.