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Four oil refineries are in Ike's way

September 12, 2008 10:55:33 PM PDT
Hurricane Ike could have a major impact on gasoline prices, it's headed for the largest cluster of oil refineries in the world and nearly all have had to shut down.

The outlook for oil and gas prices right now will depend upon the amount of damage Ike will cause to gulf oil facilities. Pump prices at gas stations have topped the $5 mark in the south because of concern about shortages. Crude oil closed up 31 cents Friday after a brief dip below $100 a barrel.

We may soon see if it's true that oil and water don't mix. Ike's arrival is causing concern of a major disruption in gasoline supplies.

"If Ike takes out major refineries and puts them off line for a long time, we're going to be feeling the effects for the rest of the year, into next year," says Phil Flynn, an oil analyst.

There is a concentration of refineries in the path of Ike. 97 percent of gulf oil production has been shut down. Bay Area based Chevron tells ACB7 it has evacuated 3,000 people who work on its offshore platforms and rigs.

Major pipelines have also been shut down, reducing gasoline deliveries in the south and along the East Coast. Gas lines resulted at stations in Charlotte, North Carolina. Prices shot past $5 a gallon in Alabama. As bad as that is, analysts say Ike's impact is softened because we're between peak demand seasons.

"We're past the summer driving season, and we're not yet in the strong demand for heating oil. We are just beginning to ramp up inventories for that, so in that sense, we may be in that pocket where the impact would be limited," says Gary Schlossberg, a Wells Capital Management senior economist.

Energy analyst James Sweeney Ph.D. at Stanford's Precourt Institute for Energy Efficiency points out the gulf refines almost a quarter of the country's oil. Losing that capacity could boost gas prices by $1 per gallon, he says. And there's no way for other refineries, such as ours on the west coast, could make up for that.

"We're at basically full capacity for all our refineries, so if some go down, there's no excess capacity that the oil can be used in other parts of the country," said Sweeney.

The nation's oil production is vulnerable to hurricanes, but there are few choices to get out of harm's way.

"This is a very convenient place to have refineries. It's the hub of a maze of pipelines that can bring refined products out. It's easy to ship the oil in. There's a lot of oil that's being produced, so it's a very natural place for the refineries," says Sweeney.

For the refineries it's not clear yet how Bay Area gas prices will be impacted. Oil and gas producers tell ABC7 they'll know more about resuming operations in the gulf by Sunday. Even then, Chevron says they will let employees deal with their own homes and losses first.


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