Wash. Post: fuel prices soar on futures markets


Richard Moore


Supply Concerns Elevate Futures 
Storms May Have Lasting Effect On Operations 

By Justin Blum 
Washington Post Staff Writer 
Thursday, September 29, 2005; D01 

Gasoline and natural gas prices soared on the futures markets
yesterday as traders grew concerned that energy operations
damaged by hurricanes Rita and Katrina could be hobbled longer
than expected.

Analysts said that if futures prices remain at elevated
levels, national pump prices for a gallon of regular could
move above $3 a gallon, as they did following Hurricane
Katrina. They added that a run-up in natural gas prices likely
will mean increases for winter heating bills.

The Energy Department's Energy Information Administration said
yesterday that 15 percent of U.S. refiners' ability to produce
gasoline, jet fuel and other oil products "could be out for at
least another couple of weeks" because of Rita and Katrina. In
addition, the Minerals Management Service reported that 80
percent of natural gas production in the Gulf of Mexico
remained shut down yesterday because of the hurricanes.

The higher futures prices came on the same day that two House
committees took up Republican legislation designed to
encourage refiners to build more plants and to spur more
domestic oil and natural gas production. Supporters said the
measures eventually would help bring down consumer prices.
Some of the provisions had been considered -- and rejected --
as part of consideration of a broad energy bill that was
signed by President Bush in August.

The Resources Committee sent to the full House a measure that
opens to natural gas drilling offshore areas that are now off
limits; it allows states to override bans on new offshore oil
drilling. The legislation also would open Alaska's Arctic
National Wildlife Refuge to oil and natural gas development, a
controversial measure that supporters said likely will be
approved as part of the budget process.

The Energy and Commerce Committee last night approved a
measure that would provide incentives to expand refining
capacity and change regulations on permits. The legislation
sparked intense opposition from Democrats and
environmentalists, who complained that it would roll back some
provisions of the Clean Air Act.

Demand for gasoline has been growing faster than refiners have
expanded capacity. Some lawmakers blamed oil companies, saying
they did not want to build new refineries because doing so
would bring down prices. Companies have disputed that, instead
citing concerns about environmental regulations and future

On the New York Mercantile Exchange yesterday, gasoline
futures rose about 8 percent from the day before and natural
gas was up about 10 percent. U.S. benchmark crude oil for
November delivery rose $1.28 a barrel on the mercantile
exchange to close at $66.35.

Traders were concerned that refineries damaged by the
hurricanes, along with those shut down as a precaution, were
taking longer to restart than expected, analysts said. They
said that could lead to a tighter market for gasoline than

"We're probably talking about retail getting above $3 a
gallon," said Michael Burdette, an analyst with the Energy
Information Administration. "The real issue is just getting
those refineries back online. If we see them come back up
relatively quickly, it will trim the market back down . . .
possibly before the retail prices catch up."

Traders also are concerned about natural gas and oil
production in the Gulf of Mexico, much of which was shut down
in advance of Rita and remains out of service. Energy
companies have been surveying damage to production platforms.
While lost oil production can be made up in additional imports
and by tapping the Strategic Petroleum Reserve, the lost
natural gas production cannot easily be offset because few
additional imports of liquefied natural gas are available.

In the House, supporters of the legislation approved yesterday
said it was needed to provide more energy suppliesand lower

"It is unfortunate that it takes a hurricane like Katrina or
Rita to show us just how acute the problem is," said Rep. Joe
Barton (R-Tex.), chairman of the Energy and Commerce
Committee, referring to refining capacity. "Now is the time to
start to correct this problem and build more refineries in the
United States."

Democrats on Barton's committee said the measure was a
giveaway to industry that was being rushed through without
hearings or enough time for deliberations.

Rep. Henry A. Waxman (D-Calif.) said Republicans were trying
to "exploit Katrina for a special interest bonanza." Rep. John
D. Dingell (D-Mich.) said the committee's process was
"cockeyed" and would produce "doomed legislation."

Barton said the measure needed to be approved quickly and that
many of the issues had been discussed previously.

© 2005 The Washington Post Company 


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