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Rita forces increase in fuel prices
Published September 30, 2005
Stalled production in the Gulf of Mexico in the wake of Hurricane Rita has reversed the recent steady decline in gas prices this month, and a gradual rise could continue for at least the next few weeks, analysts said.
In the Houston area, average gas prices Thursday climbed to about $2.79 per gallon, about 6 cents more than last weekend’s average of $2.73, said Marie Montgomery, a spokeswoman for AAA.
Nationwide, the average price for regular gasoline Thursday was $2.81.
The Facts’ weekly survey of selected gas stations across Brazoria County on Thursday found a low of $2.67 per gallon in Lake Jackson and a high of $2.99 in Freeport.
Hurricane Rita’s most serious impact on gas prices so far has been limited to areas affected by the storm such as Beaumont-Port Arthur, where drivers are paying on average 13 cents more than what they paid before the storm, she said.
Prices at the pump are closely tied to prices on the “spot market,” or a market in which suppliers sell to short-term, non-contract users, Montgomery said. Prices on Texas’ spot market are hovering around $3, which would normally translate to $3.40 per gallon for gasoline, she said.
Montgomery attributes the lower actual price to efforts by the major oil companies, which she said are holding prices below the wholesale value to stabilize the overall market.
“It’s certainly gotten out of the realm of the norm for Texas,” Montgomery said. “Obviously, long term, the outlook is prices will come back down, but it could be a month or more before things settle down.”
But initial reports that Rita did more damage to offshore oil rigs than Katrina could keep gas prices high through the next six months and trigger other problems, said David Dismukes, associate director of the Louisiana State University Center for Energy Studies.
Combined, hurricanes Katrina and Rita clamped oil refining throughout the southern United States by about 3.6 million barrels per day as of Wednesday, a U.S. Department of Energy report shows.
Both storms struck at the worst possible time — when petroleum products are being stored for winter use while there is a high demand for current use, Dismukes said.
Energy Department officials said Wednesday that two of the nation’s strategic petroleum reserve sites might be out of service for several days because of power outages.
Key refineries in Port Arthur and Lake Charles, La., might not begin running for up to a month, Dismukes said. Some projections state domestic refinery production will slip 6 percent below last year’s yields, Dismukes said.
“I don’t see how you can maintain a very robust energy demand with supply this tight,” he said.
Lower supply could have implications beyond gas prices and affect other sectors of the economy, he said. Hurricane season lasts through Nov. 30, but Dismukes said gentler weather in the coming months could soften the blow.
“It’s going to be a tough winter,” Dismukes said. “Hopefully, it’ll be a warm one.”
The Associated Press contributed to this report.
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