Sept. 25, 2005
Katrina, Rita: Who Will Pay?
Oil Price Impact To Linger; Squabbling Starts Over Rebuilding Tab
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Play CBS Video Video Costs Of Hurricane Damage Reeling from Katrina and now Rita, and coming to grips with the enormous clean up job ahead, Washington is bracing for a new storm faced by every American family.
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(CBS/AP)
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Workers at Valero's Port Arthur, Texas refinery inspect oil spill after it was flooded by Hurricane Rita Saturday (AP)
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Special Report Gulf Coast Disaster Complete coverage of the effects of Hurricane Katrina on the Gulf Coast, including anniversary coverage.
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CBS News Correspondent Anthony Mason reports the oil industry will be feeling the repercussions for months, and the ripple effect will reach into everyone's pocketbooks.
And CBS News Correspondent Joie Chen notes that politicians in Washington are already posturing over the best way to foot the bill for the massive rebuilding costs.
As Rita roared ashore, Mason says, the Gulf Coast oil industry was fearing a knockout punch.
Instead, says John Kingston, the chief oil analyst for
"Certainly," he observes, "it didn't come right up Broadway, so to speak."
He says Rita did little damage to the Houston area, home to 9 major refineries, but, "The area a little bit to the east is not an insignificant refining center."
The Texas-Louisiana border, and towns such as Port Arthur, Texas, took the worst of Rita.
Still, Kingston says, "Signals out of the refineries are pretty good. One refinery that's checked in is from Valero."
Valero Energy's refinery in Port Arthur was hit hard. Valero reports "significant damage to two cooling towers and a flare stack," and says it could take two weeks to a month to restart the facility.
"It wasn't a disaster," Kingston says, "but there is an impact on … an already very tight gasoline market."
Last week, OPEC offered to put an extra two million barrels of oil onto that market, its entire spare capacity.
OPEC's president, Kuwait's oil minister said, "I hope this will affect the price positive(ly)."
But, Mason points out, it had little impact in the oil trading pits, where all eyes were on the weather.
"I don't think it's a problem OPEC can fix," summed up energy trader Eric Bolling.
He says the problem isn't a shortage of oil. It's a shortage of refining capacity in the United States: "You can put all the barrels of oil you want on the market, if you're incapable of refining it into usable products, prices are still gonna go higher."
Twenty refineries along the Gulf Coast evacuated their workers as Rita approached.
"It's my understanding those refineries will probably be back on line in three or four days," says Dan Borne, who heads Louisiana's chemical association. "You can't just throw a switch and restart 'em."
He says, when demand is this strong, we pay for those delays.
"Every time we take a refinery down for even three or four days," he remarks, "that is gonna have some impact."
Add to that Katrina's impact: four Gulf Coast refineries remain shut "and they're not coming back for awhile," says Platt's' Kingston. "I'd say you'll maybe start to see some coming back in December or so."
The industry had its hands full just recovering from Katrina, says oil analyst Phil Flynn of Alaron Trading, "so the more damage you pile on, the further back goes the recovery process, and the longer that goes, the longer high prices stay around."
Katrina and Rita helped introduce us to $3 a gallon gas, Mason says. And, as storm winds die down, those prices may fall a bit, too. But this problem won't blow over when the hurricane season ends.
The oil fields and refineries may have dodged a bullet, he concludes, but we will have to bite the bullet and keep paying up at the pump.
And, reports Chen, the nation as a whole will keep forking over funds, as well.
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