Hurricane Katrina disrupted Gulf Coast petroleum output and rattled energy markets on Monday, sending crude-oil and natural-gas futures soaring and setting the stage for a spike in retail gasoline prices.
The Bush administration considered releasing oil from the nation's emergency stockpile while analysts awaited details on the extent of the damage to the region's platforms, pipelines, refineries and electric grid.
"We're losing a lot of crude oil and also a lot of natural gas," said Lawrence J. Goldstein, president of the New York-based nonprofit Petroleum Industry Research Foundation. Goldstein estimated that total refinery production of gasoline, heating oil, diesel and other fuels could fall by as much as 20 million barrels over the next 60 days.
By late Monday, several refiners said damage at their plants appeared to be minimal and oil prices retreated from the day's highs above $70 a barrel. But if a bleaker picture emerges in the days ahead - it may take more time to assess damage, depending on how rough the seas are - prices could run up once again, analysts said.
Based on conversations with oil and gas companies operating in the Gulf, Goldstein said it appeared that Katrina will not interrupt the region's operations as significantly as last year's Hurricane Ivan.
Wholesale gasoline prices in the New York and Gulf Coast markets soared by 25-35 cents a gallon on Monday following reports that about 8 percent of U.S. refining capacity had been shut down as a precaution ahead of the storm. One analyst said pump prices nationwide would likely average more than $2.75 a gallon by week's end, up from about $2.60 a gallon Monday.
"Unfortunately, I don't think $3 a gallon is a hyperbolic number in some markets anymore," said analyst Tom Kloza of Wall, N.J.-based Oil Price Information Service. He emphasized that the market reaction is a reflection of supply tightness, not shortages.
Natural gas futures briefly surged more than 20 percent after the temporary closure of a critical distribution hub and on concerns that power outages and flooding could prevent processors from running their plants for days, if not weeks. Even before Katrina arrived, the Energy Department had warned consumers who rely on natural gas to heat their homes to expect sharply higher bills this winter.
Johnson says he believes gasoline prices will be topping soon.
The powerful storm hit an area crucial to the U.S. energy infrastructure - offshore oil and gas production, import terminals, pipeline networks and numerous refining operations in the southern states of Louisiana and Mississippi.
On Wall Street, companies that ferry workers to and from offshore oil platforms, as well as those that provide other support services to the industry, saw their stock prices rise. Shares of Offshore Logistics Inc. climbed $2.58, or 8 percent, to $35.03 on the New York Stock Exchange, where shares of Oceaneering International Inc. rose by $1.45, or 3 percent, to $43.65.
Chevron Corp., Royal Dutch-Shell Group, BP PLC, ExxonMobil Corp. and others began evacuating workers from the region over the weekend. As a precaution, refineries capable of processing some 1.6 million barrels a day were closed and more than 600,000 barrels a day of oil production in the Gulf was shut down. Sabine Pipe Line LLC on Sunday shut down the Henry Hub, a natural gas distribution center that connects to interstate pipelines; the hub was reopened by Monday afternoon.
The Louisiana Offshore Oil Port, the largest oil import terminal in the United States, evacuated all workers and stopped unloading ships on Saturday. Any significant damage to the port would have a devastating impact, analysts said.
With top winds of 145 mph, Katrina passed just to the east of New Orleans as it moved inland and later dropped to a 105-mph Category 2 storm, sparing this vulnerable city its full fury.
"The damage to the electric power grid is the most important source of damage to consider in evaluation of the impact of Hurricane Katrina," said energy analyst Dan Lippe of Petral Worldwide in Houston.
Lippe said the operations of oil refiners, natural gas processors and chemical manufacturers could be disrupted for as little as a few days or as long as a few weeks. The extent of the damage will not be known until later this week, he said.
Light sweet crude for October delivery jumped as much as $4.67 a barrel to hit a high of $70.80 a barrel in electronic overnight trading, before slipping back to $67.25. That was still up $1.12 from its close Friday in New York.
Oil prices would need to rise to about $90 a barrel to match the highs of 25 years ago, when adjusted for inflation.
Gasoline futures zoomed 11.5 cents to $2.04 a gallon on Nymex, but on spot markets in New York and the Gulf Coast, prices were as much as 8-15 cents higher, according to Kloza. Nymex heating oil futures rose by 6.34 cents to $1.90 a gallon.
Brent crude was not trading Monday, with London's International Petroleum Exchange closed for a bank holiday.
While the precautionary shutdown of oil production and refining roiled oil markets, analysts said the storm's potential long-term damage to facilities was the bigger worry.
Hurricane Ivan resulted in the loss of nearly 44 million barrels of oil production between September 2004 and February 2005.
PVM Oil Associates in Vienna, Austria, said Katrina had the potential to do more damage to southeastern Louisiana than Ivan, which damaged seven platforms and 100 underwater pipelines.
The Gulf of Mexico normally produces 2 million barrels of crude oil a day, or about 35 percent of the United States' domestic output, according to government and industry data.