Oil Companies Prepared Despite Mild Hurricane Outlook

NEW YORK -- Houston-based Shell Oil Co. unveiled its hurricane contingency plans Monday as oil industry analysts downplayed potential supply problems from storms this year because U.S. crude oil and refined product stocks are full.

Despite the brimming stocks, though, U.S. retail gasoline prices increased for the fourth week in a row, rising another nine cents to $2.52 a gallon, the Energy Department said on Monday. It is the first time gasoline surpassed $2.50 a gallon since last October.

The 2009 Atlantic hurricane season officially began Monday and runs through Nov. 30. According to Reuters, experts predict it will be a quieter season than last, when 16 tropical storms and hurricanes formed in the Atlantic, Caribbean and Gulf of Mexico.

But, Shell, the largest natural gas producer and second largest oil producer in the Gulf region, isn’t betting on the forecast. "We prepare for the worst and hope for the best," said Frank Glaviano, vice president of Shell's U.S. offshore operations. The Gulf accounts for 15 percent of U.S.-produced natural gas and 25 percent of domestic crude oil output, according to Reuters.

Analysts told Reuters the oil industry learned vital lessons since Hurricanes Ivan in 2004, Katrina and Rita in 2005, and Gustav and Ike in 2008. And a global recession has relieved pressure on what for much of 2008 was a drum-tight U.S. oil and refined product distribution system with virtually no extra supply, according to the Reuters report.

"We learn from each prior experience, and we do what we can to minimize that disruption," said Tom Smith, president of Shell Oil Products U.S. "On the other hand, when Mother Nature comes calling, there may be certain things we can't do."

Although the national average price for regular unleaded gasoline jumped about 45 cents during May, it was still down $1.45 from a year ago, according to the Energy Information Administration.

The jump in pump costs reflects the rise in crude oil prices, which settled at a seven-month high on Monday of $68.58 a barrel at the New York Mercantile Exchange.
U.S. Energy Secretary Steven Chu warned rising crude oil prices will hurt the economy, according to Reuters.
"The higher it goes in general ... it will impede the recovery," he said at the Reuters Global Energy Summit in Washington.

Chu said if crude oil costs climb "considerably higher" then the Organization of Petroleum Exporting Countries (OPEC) will need to boost its oil production to help stabilize prices.

The EIA's weekly survey found the West Coast had the most expensive gasoline at $2.68 a gallon, up 11 cents from last week. The Gulf Coast states had the lowest regional price at $2.39 a gallon, up seven cents.

Reuters also reported the average price for diesel fuel increased eight cents to $2.35 a gallon, down $2.36 from a year ago, but still the highest price since late December. The West Coast had the most expensive diesel at $2.46 a gallon, up eight cents. The Midwest region had the cheapest diesel fuel at $2.32, up nine cents, according to the EIA.

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