In Face of Hurricane, a Rush to Secure Oil Operations

From The New York Times:

Oil and other energy prices moved higher today as Hurricane Rita gathered strength and threatened a dense patch of oil production facilities along the Texas coast in the Gulf of Mexico.

Energy companies stepped up evacuations of offshore platforms and rigs in or near the path of the hurricane, which the National Hurricane Center upgraded to a Category 4 storm on the Saffir-Simpson scale with winds of near 135 miles an hour early this morning. The many refineries along the coast of Texas were also bracing for a harsh lashing by strong winds, rain and flooding.

Crude oil for November delivery was trading up $1, or 1.5 percent, to $67.20 a barrel this afternoon on the New York Mercantile Exchange. Gasoline futures were up 7.34 cents, or 3.7 percent, to $2.05 a gallon; natural gas was up 2.7 percent.

Rita has the ability to severely disrupt oil production and refining that has still not completely recovered from the devastation wreaked by Hurricane Katrina three weeks ago. The devastation could conceivably be even more severe than the previous hurricane because the Texas coast is more densely packed with refineries and other onshore plants than Louisiana was, analysts said.

"A direct hit by a level 4 or 5 hurricane on the Houston ship channel, that would be devastating," said Bob Linden, a managing consultant at PA Consulting, noting that the area is thick with refineries and other critical energy operations.

Forecasters caution that it can be incredibly difficult to predict the trajectory of a hurricane and where it might make landfall. The National Hurricane Center believes the storm could land in a wide swath from near the Mexican border in the south to the western shores of Louisiana by the weekend. Officials in Galveston, Tex., the island city 50 miles southeast of Houston that has seen its share of hurricanes, have declared a state of emergency.

Texas accounts for more than a quarter of the United States' crude oil refining capacity, while the Gulf Coast, which both includes Texas and Louisiana, accounts for about 45 percent, according to the Energy Department. Katrina initially disabled about 10 percent of refining capacity, which were already stretched thin by heavy demand and tight supplies, and four refineries representing about 5 percent of capacity remain out of service to date.

Somehow, this doesn't surprise me.