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Gasoline May Rise in Wake of Ivan

Damage to oil facilities is not serious, but short- term shutdowns are expected to boost prices.

September 17, 2004|Dana Calvo | Special to The Times

Hurricane Ivan's rampage through the Gulf Coast largely spared the oil rigs and refineries owned by ChevronTexaco Corp. and others but could nonetheless boost fuel prices.

Oil companies were assessing the damage Thursday to Gulf of Mexico wells, which account for about 25% of U.S. oil production, and refineries in Alabama, Louisiana and Mississippi, which produce 38% of the country's gasoline. A change in direction of the deadly storm, nicknamed "Ivan the Terrible," saved the facilities from serious damage.

Still, the widespread shutdowns of rigs and refineries will reduce short-term supplies and could push gasoline prices higher at a time of year when they are normally falling.

Tom Kloza, chief analyst of the market-tracking Oil Price Information Service, said he was calling the storm "Ivan the Tourniquet" because it had already caused wholesale gasoline prices to rise 10 to 12 cents a gallon.

"It stopped gasoline prices from bleeding, like they typically do in September," Kloza said. "It put some of the organs that feed the country into shock."

Although California's cleaner-burning gasoline doesn't come from the gulf area, refinery closures there could cause local wholesale prices to move in sympathy, said Carol Thorp, a spokeswoman for the Automobile Club of Southern California.

"Speculators could raise prices because they're worried about supply," she said. "It's an area that's very much run by speculation and innuendo."

She said any uptick in pump prices probably would last only a few weeks.

On the New York Mercantile Exchange, crude oil prices rose for a second day, closing at $43.88 a barrel, up 30 cents, or 0.7%. Gasoline for October delivery climbed 1.21 cents, or 1%, to $1.226 a gallon.

Wholesale increases have yet to make their way to the retail level. The average price of self-serve regular gasoline Thursday was $2.091 a gallon in California and $1.838 a gallon nationwide, virtually unchanged from the day before, according to AAA.

Analysts said the hurricane could benefit companies that drill for oil or refine it into gasoline. Andrew F. Rosenfeld, with Prudential Equity Group, upgraded refiners to "neutral" from "unfavorable" because "the reduced output of gasoline and other refined products due to preventative shutdowns could substantially tighten up the inventory situation," he said in a note to clients.

"A multiday shutdown or slowdown of these U.S. Gulf Coast refineries would most likely ensure an inventory draw of refined products and would be supportive of refined margins," Rosenfeld said. Among the companies that could gain is ChevronTexaco of San Ramon, Calif., he said.

All across the Gulf of Mexico, refineries, platforms and rigs were dark Wednesday as the massive storm barreled toward the Gulf Coast and thousands of workers were told to leave. Hurricane Ivan was already responsible for killing scores of people in the Caribbean, and oil company executives weren't taking chances.

By Wednesday night, offshore production had plummeted to 22%, and by Thursday, the morning after winds reached 130 mph, offshore production had dipped to 17%, according to the Minerals Management Service in Washington.

ChevronTexaco's gulf oil production was squeezed by 70% as the company evacuated about 1,600 essential and nonessential workers from 70 offshore production platforms and nine drilling rigs.

The company's refinery in Pascagoula, Miss., was shut down early Wednesday. ChevronTexaco spokesman Steve Renfroe said Thursday afternoon that he didn't know when it would resume production. The refinery processes 325,000 barrels of crude oil a day.

Unocal Corp., based in El Segundo, evacuated 178 employees from oil rigs and platforms in the eastern and central gulf, losing 20% of its U.S. production Wednesday.

Kloza of the Oil Price Information Service said he doubted Hurricane Ivan would have a significant or long-term influence on oil or gas prices if companies were able to resume production by early next week.

"We're obviously at risk if we get another storm in the gulf," Kloza said, "but that's probably not likely to happen."

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