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Higher gas prices may be legacy of Rita1

The millions of residents who fled Gulf Coast cities to avoid Hurricane Rita are likely to pay higher prices for gasoline — if they can find it — on their return trips home.
Hurricane Rita Slams Into Texas Gulf Coast
Enrique Palacios fills up his truck and gas cans after waiting almost three hours at a Texaco on I-45 Saturday in northwest Houston. Lawrence Jenkins / Getty Images
/ Source: The Associated Press

The millions of Texans who fled Houston and other Gulf Coast cities to avoid Hurricane Rita are likely to pay higher prices for gasoline — if they can find it — on their return trips home.

And even if Rita's damage to Texas and Louisiana oil refineries and pipeline operations proves to be less than was feared, motorists around the country still face the prospect of at least another short-term spike in pump prices, analysts said.

"We're going higher in terms of retail prices," at least in the short term, because of tight supplies, said analyst Tom Kloza of Oil Price Information Service in Wall, N.J. "Rita was more than a nuisance, but short of a catastrophe."

Pump prices, which are already 47 percent higher than a year ago at $2.75 per gallon, could once again climb above $3 a gallon nationwide, analysts said. Supply snags are most problematic for the Gulf Coast, but markets in the East and Midwest are also vulnerable.

Twenty refineries along the Gulf Coast remained closed on Saturday, including four that were badly damaged by Hurricane Katrina almost a month ago. They account for 19 percent of total fuel refining capacity nationwide.

The biggest of those facilities, Exxon Mobil Corp.'s massive Baytown refinery and chemical plants located outside Houston near Galveston Bay, is being prepared for a restart, company officials said on Saturday.

Still, it's likely to be some time before the output of gasoline, diesel and aviation fuel is back to normal. "Refineries can't just push a button and get everything running like normal. You have to take these units up in a systematic way," said William Veno, an analyst at Cambridge Energy Research Associates.

Officials at Explorer Pipeline Co., one of several oil and fuel pipelines that carry product from the Gulf Coast to markets in the East and Midwest shuttered prior to Rita's arrival, said on Saturday that they found no visible damage so far and could restart operations as early as Monday. Colonial Pipeline Co. also said it expects to resume pumping once fuel supplies and local power are available.

Texans moving inland to avoid Rita faced traffic backups of epic proportions as gas stations along the exit routes ran dry. Those shortages continued on Saturday, leading a frustrated Houston Mayor Bill White to declare the situation "totally unacceptable."

But Harry Quarls, senior managing director for Booz Allen Hamilton's global energy division, said backloading inventory is costly and can be risky.

Part of the problem, he said, is that some motorists are buying gas they really don't need. "Whenever there is a storm, people top off their tanks and you get this one-time boost in demand," he said.

Tamesha Wiley, who didn't evacuate from Houston, waited in line for two hours to fill her minivan at a Texaco station about 25 minutes north of downtown Houston on Saturday. "If I don't get it now, I might not get it for days," she said.

Concerns over long gas lines and empty pumps, as well as jammed thoroughfares, kept James Spriggs Jr. at home for the hurricane. "All of the places were without gas _ I mean everywhere," said Spriggs, a seventh grade English teacher in Houston who opted to stay at the Wyndham Hotel in Houston.

"Now I look at the stations and still hardly anyone is open," he said. "I saw one place with some trouble. At least four or five people were sitting on the ground in handcuffs."

Some relief may be on the way for those making their way back to the Houston area.

On Saturday, Shell Oil Co., a unit of Royal Dutch Shell PLC, and Motiva Enterprises LLC said four tanker trucks loaded with gasoline before the storm have already been dispatched for local distribution and will return to the terminal for re-loading immediately after leaving designated stations.

Priorities will be given to evacuation routes along Interstate 45, Interstate 10 and Highway 290, which had back ups so bad that some motorists either gave up on leaving, pulled to the side of the road to await the congestion or ran out of gas.