about 2.4 million barrels of refining capacity have been halted, roughly 15 percent of the nation’s total, according to figures from Platts, the energy information arm of McGraw-Hill Cos. The U.S. Gulf Coast is home to nearly half the nation’s refining capacity.
"Fifteen percent looks small, but the impact is larger than meets the eye," said Eswaran Ramasamy, director of Platts’ U.S. market reporting. "Louisiana refineries supply a chunk of the southern states’ product needs – gasoline, diesel, whatever." For now, prices were climbing only slightly.
A gallon of regular gasoline jumped one-half cent overnight to a national average of $3.687, auto club AAA reported Sunday. The price rose slightly more than a penny Saturday. A month ago the average price was $3.898, AAA said.
The Energy Department said Sunday gasoline stocks were normal along the Gulf Coast for this time of year. Shell reported strong demand for gasoline at its stations along the Gulf Coast, though it said supplies remained strong.
Where prices go in the coming days and weeks depends largely on Gustav’s path and intensity. Churning toward the Gulf Coast with frightening strength and size, the storm was forecast to hit the Louisiana coast sometime Monday.
The two biggest challenges for refiners after monster storms Katrina and Rita passed three years ago were power disruptions and flooding – both of which prompted refiners to examine their practices and make adjustments.
Some refineries have raised critical equipment so it won’t flood, and they’ve also beefed up plans to get backup power as quickly as possible.
Kenneth Medlock, an energy expert and adjunct economics professor at Rice University, said a big concern is Gustav lingering after it makes landfall and dumping massive amounts of rain on the region. "That could keep a lot of those refineries shut down for awhile because you have to deal with flooding and power outages," Medlock said. "If that capacity remains shut down for an extended amount of time, you could see prices really start to rise. Four-dollar (gasoline) is not out of the question."The industry also will be keeping close watch on the Louisiana Offshore Oil Port, which is in the storm’s direct path and has shut down operations too. The facility handles about 12 percent of the nation’s crude imports and is tied by pipeline to about half the nation’s refining capacity, much of it along the Mississippi River from the New Orleans area north to Baton Rouge.