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Hurricane Season Threatens Gas Prices

June 1, 2000 - Gas prices may become more pumped up, as an expected busy Atlantic hurricane season this year threatens the oil and gas sector heavily clustered in the Gulf of Mexico, analysts said Thursday.

“Hurricanes would just be another of a long list of troubles in the energy industry this year,” said Aaron Brady, analyst for Energy Security Analysis Inc. in Boston.

According to the National Oceanic and Atmospheric Administration, hurricane season always makes the energy industry nervous. The 2000 season should be “above average,” with at least 11 tropical storms and three or more major hurricanes.

But the danger is a concern to consumers already facing the highest gasoline prices ever recorded at the pumps. Closure of a major refinery has been known to raise gasoline futures prices as much as much as a nickel a gallon in a single day's trade on the New York Mercantile Exchange.

“Any time a hurricane rolls into the Gulf it can cause problems and boost prices,” said Alan Struth, analyst for Honeywell HiSpecs Solutions in Houston, Texas.

Gulf Coast refineries, which spread from Corpus Christi, Texas to Pascagoula, Mississippi, consume around 7.5 million barrels per day (bpd) of crude oil and account for nearly half of the nation's refined oil production.

The largest refinery in the western hemisphere, Hovensa's 545,000 bpd behemoth on St. Croix in the U.S. Virgin Islands, lies directly in the busiest hurricane path in the Atlantic.

Turbulent weather is also a threat to crude oil and natural gas production, since most of U.S. offshore oil and natural gas is produced off Louisiana, Mississippi and Texas in the Gulf of Mexico, analysts said.

The strength in gasoline prices is attributed to extremely tight supplies of clean-burning summer gasoline in the Midwest, low refinery utilization nationwide, as well as tight crude oil supplies which have boosted the refinery feedstock prices to about $30 a barrel.

But last year, Hurricane Floyd caused $3 billion to $6 billion in damage around North Carolina, and forced more than a half-dozen refineries to shut along the Gulf and East Coast.

In 1998, when Hurricane George made a $5.9 billion mess in Florida and the Caribbean, Chevron Corp's large Pascagoula, Mississippi, refinery was flooded and shutdown for roughly two months.

Company sources said flooding at the Pascagoula refinery was so severe it washed an array of wildlife into the plant, including snakes and alligators.

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