HOUSTON, Tex. — Oil prices continue to rise as producers shut down refineries along the Gulf Coast in preparation for Hurricane Rita.
As of yesterday afternoon more than 23 per cent of the total U.S. refining capacity had been shut down as Hurricane Rita moved towards shore. That represents about 17.1 million barrels per day in production. About 18 oil refineries in Texas lie in Rita’s path with a combined production capacity of about four million barrels per day, according to the U.S. Energy Information Administration.
Among the refineries shut down are Exxon Mobil’s Baytown refinery in Texas. It is the biggest refinery in the U.S., processing 557,000 barrels of oil per day. Oil companies have evacuated many of their non-essential workers, crippling their oil production capabilities.
Three refineries in Louisiana and Mississippi remain closed due to damage incurred during Hurricane Katrina.
“One of the biggest hurricanes ever is headed for the heart of America’s refining capacity,” said Jason Schenker, economist with Wachovia Corp. “(Fuel) prices will hit new records if we get reports of flooding and other destruction once the storm passes.”
Phil Flynn, vice-president of risk management with Alaron Trading Corp added “If some refineries are damaged, prices will rise higher than they did as a result of Katrina. There would be record pump prices, which would eventually go down because demand will fall as the economy falters. There comes a point when people will reduce driving and I think we’re close.”
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