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Rita forces refineries and pipelines to shut down

WASHINGTON—Gasoline prices began rising anew Thursday as Hurricane Rita forced the shutdown of refineries, pipelines and more than 90 percent of offshore oil production in the Gulf of Mexico.

Even if Rita avoids a direct hit on the nation's oil belt, the closures of Texas and Louisiana refineries and pipelines that feed gasoline to the Midwest and East Coast assured higher fuel prices and disruptions in supplies. Gasoline futures contracts rose 8.63 cents to $2.14 per gallon in trading on the New York Mercantile Exchange, and many service stations notched up their prices as well.

"Expect prices to rise in the short term. That could be extended into the long term, depending on damage—if there is any—to refineries," said Ben Brockwell, the director of pricing for the Oil Price Information Service.

In a news conference Thursday, Red Cavaney, the president of the American Petroleum Institute, urged motorists to drive less and warned that topping off gas tanks would drain the limited supplies.

Twenty-one refineries in Texas and Louisiana might be in Rita's path. Together they represent more than 27 percent of U.S. refining capacity. Hurricane Katrina forced the shutdown of nine refineries, four of which remain offline and represent about 5 percent of U.S. output. Together, Katrina and Rita threaten to close down about one-third of America's refining capacity, which turns crude oil into gasoline and other fuel products.

Among Katrina's lessons: It can take weeks to bring a refinery back into production because of factors outside the facility, such as downed power grids, ruptured pipelines and closed ship channels.

"I would say two weeks is on the short side ... more likely three or possibly four, based on our experience," said Ken Stern, an energy analyst at FTI Consulting Inc. in New York.

Complicating matters, several Houston-area pipelines that feed gasoline to the Midwest are closed. The Explorer system shutdown meant there was no fuel moving north of Tulsa, Okla., to Missouri and Illinois.

Colonial Pipeline, which operates the nation's largest pipeline, continued to operate Thursday from its origin point in Houston. Colonial positioned generators to offset any power failures that would prevent gasoline from flowing east through its lines.

"As the storm forces refineries to close, Colonial will maintain deliveries by turning to refineries east of the evacuated areas," the company said in a statement. Power outages after Katrina choked off Colonial's pipelines and left some gas stations in the Southeast bone dry.

Rita forced the evacuation of oil rigs and platforms across most of the central and western Gulf of Mexico. The federal Minerals Management Service reported Thursday afternoon that nearly 92 percent of offshore oil production was closed. The gulf accounts for more than a fifth of U.S. domestic oil production.

Oil prices were relatively stable Thursday but traders expected a volatile Friday.

"It's the uncertainty on the storm's track. We're still quite a nervous market, and a substantial fear premium has already been priced in at this point," said John Kilduff, an energy analyst with Fimat USA. "We're hanging on every report."

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(c) 2005, Knight Ridder/Tribune Information Services.

GRAPHIC (from KRT Graphics, 202-383-6064): 20050922 RITA energy

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