Storms cast spotlight on energy's new reality
Jad Mouawad, NY Times
The vast energy complex spread along the hurricane-battered Gulf Coast apparently escaped serious damage in the latest storm. But for an industry still reeling from the impact of Hurricane Katrina, the recovery will be long and arduous, leaving global energy markets at the mercy of other natural disasters - or unforeseen twists in unpredictable oil-producing countries like Nigeria and Iran.
Once again, Hurricane Rita illustrated the energy market's new reality: with little production or refining capacity to spare, any disruption can have a big impact on tight and increasingly edgy markets. Until investments are made in new supplies, or demand slows down enough to ease the capacity squeeze, analysts warn that markets will remain volatile.
In the short run, much will depend on how quickly oil companies can restart their refineries and bring gasoline, natural gas and other products back to consumers. Energy prices, which had already soared in recent months because of fears that supplies were lagging demand, peaked last month after Hurricane Katrina cut production in the Gulf of Mexico and crimped many refiners.
By now, with the summer driving season at an end, refineries should have started building stockpiles of heating oil for the winter. Instead, most of them have been struggling to churn out more gasoline to make up for the lost refining capacity. Ahead of the peak winter demand, this leaves markets for heating oil and natural gas on shaky foundations and could mean higher prices in coming months.
(26 September 2005)
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