Hurricane Katrina has disrupted Gulf Coast petroleum output and rattled energy markets, sending crude-oil and natural-gas futures soaring and setting the stage for an increase in retail petrol prices.
The Bush administration considered releasing oil from the nation's emergency stockpile while analysts awaited details on the extent of the damage to the region's platforms, pipelines, refineries and electric grid.
"We're losing a lot of crude oil and also a lot of natural gas," said Lawrence J. Goldstein, president of the New York-based nonprofit Petroleum Industry Research Foundation. Goldstein estimated that total refinery production of gasoline, heating oil, diesel and other fuels could fall by as much as 20 million barrels over the next 60 days.
Several refiners said damage at their plants appeared to be minimal and oil prices retreated from the day's highs above $70 a barrel. But if a bleaker picture emerges in the days ahead - it may take more time to assess damage, depending on how rough the seas are - prices could run up once again, analysts said.
Based on conversations with oil and gas companies operating in the Gulf, Goldstein said it appeared that Katrina will not interrupt the region's operations as significantly as last year's Hurricane Ivan.
Wholesale gasoline prices in the New York and Gulf Coast markets soared by 25-35 cents a gallon on Monday following reports that about 8 percent of U.S. refining capacity had been shut down as a precaution ahead of the storm. One analyst said pump prices nationwide would likely average more than $2.75 a gallon by week's end, up from about $2.60 a gallon today.
"Unfortunately, I don't think $3 a gallon is a hyperbolic number in some markets anymore," said analyst Tom Kloza of Wall, N.J.-based Oil Price Information Service. He emphasized that the market reaction is a reflection of supply tightness, not shortages.
Natural gas futures briefly surged more than 20 percent after the temporary closure of a critical distribution hub and on concerns that power outages and flooding could prevent processors from running their plants for days, if not weeks. Even before Katrina arrived, the Energy Department had warned consumers who rely on natural gas to heat their homes to expect sharply higher bills this winter.
The powerful storm hit an area crucial to the US energy infrastructure - offshore oil and gas production, import terminals, pipeline networks and numerous refining operations in the southern states of Louisiana and Mississippi.
On Wall Street, companies that ferry workers to and from offshore oil platforms, as well as those that provide other support services to the industry, saw their stock prices rise. Shares of Offshore Logistics Inc. climbed $2.58, or 8 percent, to $35.03 on the New York Stock Exchange, where shares of Oceaneering International Inc. rose by $1.45, or 3 percent, to $43.65.
The Gulf of Mexico normally produces 2 million barrels of crude oil a day, or about 35 percent of the United States' domestic output, according to government and industry data.