Hurricane Rita Generates New Energy In The Oil Pits & At The Pump
Monday, September 26, 2005SUSIE GHARIB: Hurricane Rita may be history tonight, but the storm is still having a major impact on the nation`s energy supplies. At the New York Mercantile Exchange, oil and gas prices slid, then ignited, as traders tried to gauge the damage from Rita. Meanwhile, President Bush urged Americans to conserve energy. We have two reports this evening detailing today`s action in the oil pits and in Washington. We begin with Erika Miller in New York.
ERIKA MILLER, CORRESPONDENT: A striking turnaround in the New York oil pit today, as traders struggled to assess the damage to oil facilities caused by Hurricane Rita.
RAYMOND CARBONE, OIL TRADER, PARAMOUNT OPTIONS: It seems like a lot of people are just trying to digest the information that has been coming out since the storm hit. Some of it is positive, a lot of it is negative, a lot of assessments haven`t been done yet. So really, it`s conjecture at this point.
MILLER: November crude futures fell sharply at the start of trading, but reversed course late in the day to close up $1.63 at $65.82 cents a barrel. Oil initially fell on preliminary reports, showing little damage to Gulf Coast refineries. The hardest hit appears to be to a Valero plant in Port Arthur, Texas, which will need at least two weeks of repairs. But late in the day, traders started to rethink Rita`s impact. Roughly 15 percent of national refining capacity remains offline along the Gulf Coast, and most of the region`s oil and natural gas production is still at a standstill. Now, traders fear those outages will lead to fuel shortages and higher prices.
MICHAEL ROTHMAN, ENERGY ANALYST: There`s a general fear that we`re simply running out of oil, that there`s not enough capacity to produce it, not enough capacity to refine it. And it`s becoming a very emotional, also bullish, entrenched view that sits out there.
MILLER: Another concern for energy markets is coming cold weather. Many refineries have delayed their annual switchover from gasoline to heating oil. As a result, many traders expect higher energy prices this winter, especially for heating oil.
CARBONE: There has been no turnaround, no heating oil being produced in any meaningful way recently. I think that`s going to come back and haunt the market.
MILLER: Just how much higher could your heating bill be this winter? The Energy Department expects prices to be up roughly 35 percent over last year, but analysts think that`s too conservative. Erika Miller, "Nightly Business Report," New York.
STEPHANIE DHUE, CORRESPONDENT: I`m Stephanie Dhue. The high cost of gasoline is on the mind of President Bush. Today, he called on Americans to cut out nonessential driving. He says the government will take the lead in conservation.
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: If it makes sense for the citizen out there to curtail nonessential travel, it darn sure makes sense for federal employees.
DHUE: Bush is also encouraging federal employees to carpool, or use mass transit, and will shift federal electricity use to off-peak hours. The president also wants to increase domestic oil production.
BUSH: We need additional capacity in America. We need additional refining capacity, for example, to be able to meet the needs of the American people. The storms have shown how fragile the balance is between supply and demand in America.
DHUE: Even though Congress passed an energy bill in July, a new one is already in the works. Proposals center around giving tax incentives to build new refineries and streamline the permit process to build and expand plants.
BOB SLAUGHTER, NATIONAL PETROCHEMICAL AND REFINERS ASSOCIATION: We need to encourage investment in these facilities because, as we`ve found out, you can`t just build refineries overnight. We`ve got to plan now to have adequate capacity for 10 years from now, or 15 years from now, and so I think it makes sense to remove disincentives.
DHUE: But others argue that emphasis needs to be on conservation, especially increasing fuel efficiency standards for cars and trucks.
KATERI CALLAHAN, ALLIANCE TO SAVE ENERGY: If we can address the demand side, if we can lower our requirements for energy, that`s going to effect price, that`s going to boost national energy security, and it`s going to improve our environment.
DHUE: Higher prices alone will do some of what a new energy bill aims to do: Give refiners a reason to invest, and consumers a reason to conserve. Stephanie Dhue, "Nightly Business Report," Washington.
