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Refinery Damages Less Than Feared

Damage from Hurricane Rita to the many U.S. oil refineries along the Texas Gulf coast appears limited, and analysts say the long-term economic impact of the storm should be minimal. They say any increase in domestic U.S. gasoline prices should be temporary as refineries shut down by the hurricane resume operations.

Clean-up operations have begun at the Texas oil refineries struck by Hurricane Rita over the weekend. For the most part, damage was limited, although at least 14 refineries remain shut down.

However, the Valero Energy Company said its refinery in Port Arthur, which processes 250,000 barrels of oil a day, suffered significant damage.

Valero workers, like Eugene Cupian, used hoses to clean up an oil leak.

"We're skimming the oil off the water, on the water, and it's going into a machine, getting pumped into a big tank."

The Gulf of Mexico contains about one-third of the nation's refineries, so any disruption can have major economic repercussions. Gasoline prices soared when Hurricane Katrina damaged refineries in Louisiana last month.

But oil traders have discounted Rita's effects, according to energy analyst Vahan Janjigian.

"Hurricane Rita was not as bad as many people feared and as a result we are starting to see oil prices, gasoline prices and natural gas prices come down a bit.

However, I do expect oil prices to come down more than gasoline prices because gasoline is also a function of refining capacity and even though the evidence indicates that not many refiners were really hit very hard by the hurricane, the fact of the matter is refining capacity was already limited and is going to continue to be limited."

On Tuesday, President Bush flew to Texas where he got a briefing from Texas officials about the oil refinery situation and the rest of the hurricane recovery effort. He later boarded a helicopter with the governor of Texas to take an aerial tour of the region damaged by the storm.

Meanwhile, in Port Arthur, residents are assessing the damage caused by Rita and starting to clean up. Among them is Kurt Mallonson. "I just finished roofing this side and a quarter of it peeled up and I just put it back, shingles and all. The other half of the roof is totally gone, that's why I tarped it."

Repairing the damage to homes and businesses is likely to last weeks, if not months, more time than it will take to get the oil refineries operating again.