We had feared the worst of Hurricane Rita, but fortunately it didn't cause as much damage to the oil refineries as it might have. But oil production has been temporarily reduced because of power outages and refineries that were shut down in anticipation of the hurricane. "Good Morning America" financial contributor Mellody Hobson talked about what Rita's aftermath could mean for gas and oil prices.
Refineries located in and around Houston fared much better than expected. Exxon Mobil Corp. said workers would return today to begin restarting its 557,000-barrel-per-day Baytown refinery, the largest in the country.
Power outages in Texas and Louisiana have left more than a million customers, including refineries, without electricity in the aftermath of Rita.
Since Katrina, more than 33 million barrels of oil and 156 billion cubic feet of natural gas have been lost.
On Sunday, the average retail cost of gasoline nationwide was $2.78 a gallon, up 2 cents from the day before and 90 cents higher than a year earlier, according to the Oil Price Information Service of Wall, N.J.
The Houston region accounts for about 25 percent of the nation's oil refining capacity. Fortunately, because of Rita's path, we didn't see the level of destruction that we all had feared. Only two of the region's many refineries were damaged. Those refineries will take a couple of weeks to repair and get running again. That's bad news. But certainly, it's not as bad as it could have been.
We also have to remember that in preparation for the storm, the oil companies shut down more than a dozen refineries. All offshore oil productions in the area were also shut down. So we're losing about 1.5 million barrels of oil a day because of the shutdown. But nearly all those refineries and oil platforms will be running normally very soon.
I think we're going to see a brief spike in prices. We could see gas prices hit a nationwide average of $3 again, like we saw in Katrina's wake. But I don't think this will last long, since there was no serious damage done to the Houston refineries. So, we'll feel a little pain, but it shouldn't be long term.
Prices should level off in the coming weeks, as we get out of the hurricane season in November. Then, we may even see a decline in prices. But, there's still uncertainty in the Middle East. We're also hearing a lot of anti-American talk from the president of Venezuela, a country that is the source of a lot of our oil. So, there's still a good deal of uncertainty out there, which means it's unlikely that prices will fall significantly.
Conservation in any way is a good idea, and what they're doing in Georgia is definitely a good short-term fix. But, it's not going to fix the larger problem: the fact that America's thirst for oil is just too great for the dwindling supply. But we are beginning to see a shift in the way most Americans think about gas and conservation. We saw a similar thing in the 1970s, when sky-high gas prices pushed consumers into smaller, more fuel efficient cars. So far this year, SUV sales are down 12 percent.