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Getting Ready for Rita

NEW YORK--Oil and gasoline prices moved higher yesterday as at least seven refineries shut down or prepared to do so as Hurricane Rita headed toward the Texas coast, The New York Times reported.

According to The Times , crude oil for November delivery was up 90 cents, to $67.70 a barrel, on the New York Mercantile Exchange Thursday morning. Gasoline futures were up 13.19 cents, to $2.185 a gallon, and natural gas was 3.6 percent higher. The stock market was down slightly late yesterday morning after the major stock indexes fell a percent on Wednesday.

Still recovering from Hurricane Katrina, energy companies were pre-emptively shutting down refineries in and near Houston. They have also been evacuating workers from oil platforms and rigs in the Gulf of Mexico. All together, the seven affected facilities process about 2.2 million barrels of crude oil a day, or about 12.9 percent of the nation's capacity, The Times reported. By comparison, Katrina initially shut down 10 percent of the nation's refining capacity in Louisiana and Mississippi, about half of which remains out of service.

If refineries remain shut down for an extended period, tight gasoline supplies, which just last week reached their pre-Katrina levels, would be stretched thin. The retail price for a gallon of regular unleaded gasoline averaged $2.755, down from $2.764 Wednesday, according to AAA. Prices spiked past $3 in many cities after Katrina hit, The Times reported.

Rita is expected to weaken from its current Category 5 designation before making landfall near Galveston, the island city 50 miles south of Houston, according to the National Hurricane Center. Much of Houston's downtown business district, home to many of the world's biggest energy companies, started emptying Wednesday with many offices closed or closing today.

One energy analyst described the evacuations and shutdowns at both offices and at refineries as more orderly and better organized than during Katrina's approach.

"That's important because if you shut them down according to a plan, then you can bring them back faster than if you do an emergency shutdown," analyst Dan Pickering, president of Pickering Energy Partners of Houston, told The Times . "We are learning a little bit from Katrina. We are more prepared."

Industry officials and analysts say Rita could potentially be stronger than Katrina, but it may cause less long-lasting damage to the nation's energy infrastructure.

Texas has more than a quarter of the nation's 17 million barrels a day of refining capacity and much of it is on the coast. But it is spread over a wide swath of land from as far south as the Mexican border to the western shores of Louisiana.

"The 4.5 million barrels is spread out across a lot of distance and even the concentration in Houston is still well back from the coast," Pickering said in the Times report.

Houston is about 50 miles inland from the shore and is buffeted by barrier islands like Galveston, unlike New Orleans, which has always been extremely susceptible to flooding because it is below sea level and sandwiched between a large lake and a river.

About 18 Texan oil refineries are threatened by Hurricane Rita, with a combined production capacity of about 4 million bpd, the U.S. Energy Information Administration said in an Associated Press report. On Thursday, 10 refineries in the Lone Star State and one in Louisiana were fully shut, including Exxon Mobil's Baytown, Texas, refinery, the largest in the United States. Three others were at least partially shut.

Meanwhile, four refineries, three in Louisiana and one in Mississippi, remained shut by damage from last month's Hurricane Katrina. With the refineries shut from from Katrina, the 11 downed or partially downed Texas refineries total nearly 23 percent of U.S. oil refining, reported the AP .

When Katrina slammed into Louisiana and Mississippi on Aug. 29, it left a wake of toppled platforms offshore. Crews were had been working to fix the damage done by Katrina were evacuated in the face of Rita. About 73 percent of total offshore oil production and 47.13 percent of natural gas output was shut in, the AP reported.

Together, Rita and Katrina have shut in 27.1 million barrels of crude, less than the 45 million barrels shut by last year's Hurricane Ivan over six months.
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