MIAMI – New Orleans stood dead in the path of Hurricane Katrina, but the entire nation will feel the brunt of the powerful storm if oil and gas operations in the Gulf get whacked.

Roughly 30 percent of the oil and gas consumed in the United States flows along pipelines or is hauled in on tankers and barges in the Gulf Coast.

A major hit would disrupt fuel shipments and send prices soaring even higher right before the Labor Day holiday, when more than 34 million Americans are projected to hit the road.

Gas prices already are up an average 83 cents a gallon this year. Analysts predict that fears of a Katrina shortage could drive crude oil prices, which traded at around $66 a barrel on Friday, to as high as $70 this week. Every additional $1 per barrel translates into more than 2 cents in the price of a gallon of gasoline.

“Monday morning, take every penny in your wallet and invest in oil, because the hurricane is projected to come in in the heart of the gas and oil port,” said Ted Falgout, director of Port of Fourchon, a key oil and gas hub that sits 60 miles south of New Orleans on the Gulf of Mexico. “Prices are going to go up.”

Florida in particular would feel the impact: As much as 90 percent of the state’s gasoline arrives by ship from oil refineries along the Mississippi River.

Gov. Jeb Bush warned the fuel supplies at Florida ports, which seemed ample on Friday, now will not be enough in view of an expected shutdown of the refineries off the Louisiana coast.

“There are localized fuel shortages and my expectation is those will continue,” he said. “We’re encouraging people to use fuel responsibly and leave fuel for their neighbors.”

“It’s not going to be pretty,” said Jim Smith, president of the Florida Petroleum Marketers and Convenience Store Association. “We’re totally dependent on that water-borne route.”

Smith and other experts said Katrina risks damaging three key links in Florida’s fuel-supply chain:

• The region’s oil production comes to a halt, crimping the normal flow of crude. Off-shore oil rigs pump crude oil from the floor of the Gulf of Mexico – 1.5 million barrels a day, the equivalent of what we bring in from Saudi Arabia.

And much weaker hurricanes have caused lasting damage to the metal structures. In fact, some are still off-line from Ivan last year and from Dennis, which hit in July.

• Imported oil can’t get into the ports. New Orleans is a key southeast port with facilities to accept super-tankers , making it an important source of foreign crude. Much of that fuel is pumped from off-shore platforms to New Orleans through underwater pipes.

• Refineries, which convert crude oil into gasoline and diesel fuel, are hampered from operating. Refineries in Louisiana, Alabama and Mississippi all are imperiled by Katrina, and most have likely already shut down production in order to brace for the bad weather.

Even brief shutdowns in advance of a storm can cause supply disruptions.

Already oil production in the region has essentially been shut down as platforms button up operations in preparation for a potential hit.

Chevron and Exxon Mobil shut offshore oil and gas production and evacuated staff as Hurricane Katrina approached. Valero Energy and Chevron shut down refineries, and the Louisiana Offshore Oil Port closed its onshore pipeline.

The possibility of a Category 5 hurricane hitting a major fuel port has industry executives warning of more serious, long-term turmoil.

“If damage is extensive – to platforms, to pipelines under the sea and to the connections of pipes – the impact is longer-lasting,” said John Felmy, chief economist at the American Petroleum Institute, in Washington, D.C.

Sidney Coffee, executive assistant to the Louisiana Governor’s Office for coastal activity, said the poor condition of the region’s wetlands has left the oil pipelines more exposed and thus more vulnerable to damage by a hurricane. “Many of the pipelines are open to conditions. There’s going to be a lot of damage,” she predicted.

“The loss of life is the main worry, and we hope that won’t happen. But after that, everybody is going to be worried about oil.” She added: “With gas prices where they are already, now what?”

Smith, of the Florida petroleum group, said crude oil supplies don’t worry him too much – the United States government keeps a 30-day supply on reserve for emergencies – but that a string of damaged refineries would leave the nation short on processing capacity.

“There’s a huge amount of refineries that are going to have to go down,” he said.

Federal air-quality regulations add to the complications. Gas stations in six of Florida’s most populous counties – including Broward, Miami-Dade and Palm Beach – are required to sell high-grade fuel to comply with local air-quality regulations, Smith said.

Those rules limit the flow of fuel from many Northeast ports, but the federal Environmental Protection Agency often waives the regulations when Florida’s fuel supply tightens. In fact, as Hurricane Katrina approached South Florida, the EPA agreed to such a waiver in anticipation of fuel shortages.

Smith said he was more concerned about the public’s reaction to the potential fuel squeeze, since gas worries often lead to gas hoarding.

With forecasters eyeing two Atlantic weather systems as potential tropical storms – and with many South Florida gas stations shuttered or empty in the wake of Katrina – fuel is bound to be a concern in the coming days.

He said Florida currently has a 10-day supply of fuel “as long as everybody doesn’t panic and go nuts.”


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