U.S. Refinery Outages Push Up Fuel Prices

U.S. and California diesel prices jumped to record highs and gasoline prices surged as the key Gulf Coast energy industry strained to repair unexpectedly severe hurricane damage, a federal survey showed Monday.

A dozen refineries in Texas, Louisiana and Mississippi remained shut down Monday, with only one -- an Exxon plant in Beaumont, Texas -- that appeared ready for a quick return to full production. Together, they represent nearly 20% of the nation’s ability to turn oil into refined products. In addition, some pipelines carrying fuel to the Midwest and the Southeast were operating at only partial capacity.

That supply squeeze, coming as farmers swing into the fall harvest, brought a nearly 35 cent jump from the previous week in the average U.S. price of diesel to $3.144 a gallon, according to the Energy Information Administration’s weekly survey of gasoline stations. That shattered the diesel record of $2.898 a gallon set over the Labor Day weekend. California diesel stood at $3.262 a gallon, up slightly from its own Labor Day record of $3.25.

The average U.S. pump price for self-serve regular gasoline rose 12.5 cents to $2.928 a gallon over the last week, and the California average increased 2.6 cents to $2.973 a gallon, the agency said. Both averages were below records set Sept. 5 of $3.069 a gallon nationwide and $3.056 a gallon in California, but were well above year-ago prices

Only the lower Atlantic states posted higher fuel prices than California at $3.283 a gallon for diesel and $3.024 for gasoline.

The slow recovery from the one-two Katrina-Rita punch means that fuel production equal to hundreds of thousands of barrels a day could be lost for most of the fall, said Tom Kloza, chief oil analyst for the Oil Price Information Service, which tracks fuel supplies and prices.

“We are in some trouble. It’s looking like a tough, tough winter,” Kloza said.

Nearly 93% of Gulf Coast crude oil production remained out of commission, representing a slight improvement from 98% on Friday, according to a report Monday by the Interior Department’s Minerals Management Service. Nearly 75% of natural gas production from the gulf was shut down, the report said. The Energy Department said that 21 natural gas processing plants remained closed.

If the production numbers don’t improve soon, “people will have to get used to higher prices for a while,” said Phil Flynn, senior market analyst for Alaron Trading Corp. “It’s not just the damage, it’s how quickly you can fix it. How many people and helicopters and repair equipment can you have when everyone is trying to get the same repair equipment at the same time? It gets difficult.”

In New York futures trading, natural gas prices were up for the eighth time in the last 11 sessions, rising 9.6 cents to $14.017 per British thermal unit. Natural gas has leaped more than 40% since Katrina struck the Gulf Coast in late August. The U.S. benchmark light, sweet crude for November delivery fell 77 cents to $65.47 a barrel on the New York Mercantile Exchange.

Still, some analysts said that the situation could have been worse if Rita had veered west, toward Houston’s heavy refinery concentration.

“Rita hit 7% of the U.S. refinery capacity. If it had hit 13%, gas prices probably would have been at $4 or $5 a gallon. That is the good news,” Flynn said. “The bad news is you may have to pay $3.”