Hurricane Packs Punch on the Energy Markets

In California, the average retail price of regular gasoline hit a record $2.77 a gallon in the week ended Monday, up 2 cents from the previous week, the Energy Department said. The price stood 67 cents higher than a year earlier. The U.S. average price slipped two-tenths of a penny to $2.61 a gallon, up 74.4 cents from a year ago.

Still, industry experts found silver linings in the hurricane's clouds. They noted that some refineries continued to operate, albeit at reduced rates. The stock market closed higher, including shares of oil companies that are major players in the Gulf of Mexico, such as Exxon Mobil Corp., Chevron Corp. and Marathon Oil Corp.

Oil giant Saudi Arabia also said it stood ready to boost its daily production by more than 1 million barrels a day, to 11 million, to fill any supply shortages caused by Katrina.

And President Bush didn't immediately release oil from the U.S. Strategic Petroleum Reserve -- a storage facility filled with 700 million barrels of oil for national emergencies -- signaling that the White House didn't yet expect a major shortage of supplies. The government might use the reserve to make oil loans to refiners facing shortages, government officials said, just as it loaned more than 5 million barrels after Hurricane Ivan.

The reserve "is there for emergency situations, and that would include natural disasters," White House spokesman Scott McClellan said on Air Force One as Bush flew from Texas for appearances in Arizona and Southern California. The administration has rejected calls to release some of the reserve to mitigate high energy prices, saying Bush would consider the move only in response to a major disruption in supplies.

On Capitol Hill, Rep. Joe L. Barton (R-Texas), chairman of the House Energy and Commerce Committee, asked Bush on Monday to take such action if the hurricane "wreaks havoc" on U.S. oil supplies. Sen. Barbara Boxer (D-Calif.) urged the president to immediately tap the reserve to provide "some relief from skyrocketing oil prices."

Although Hurricane Katrina's damage has yet to be tallied, the initial effect appeared to be less than the cataclysm some feared, said Phil Flynn, senior market analyst at Alaron Trading Corp. in Chicago.

After a weekend filled with televised images of Katrina bearing down on the Gulf Coast, "it looks like New Orleans may be spared from annihilation, the levees might hold and the refineries might not be underwater, and that is a big positive for our country," Flynn said.