Experts disagree on vulnerability of U.S. oil production

Most of the damage from Katrina and its equally destructive sister, Rita, has been repaired. But not all. Several offshore oil platforms lie scuttled on the ocean floor, while some undersea pipelines still haven't been fixed. As a result, the Gulf of Mexico produces roughly 10 percent less crude than it did before Katrina crashed into the Louisiana coast a year ago today.

That doesn't trouble energy economists much. They say increased oil imports have made up for the gulf's lost production.

Still, experts warn that the United States remains vulnerable in another way that last year's hurricanes made painfully clear. The country still relies on Gulf Coast refineries for nearly half of its domestically made gasoline. It was damage to those refineries _ not to offshore wells _ that sent gas prices shooting past $3 per gallon nationwide.

All of the refineries have returned to production since the storms hit. But should another hurricane strike, drivers would probably see another spike in prices. Worse, some cities could experience gas shortages, just as they did after Katrina.

"The lesson we could have taken from Rita and Katrina is that our mobility is very much at risk," said Amy Myers Jaffe, an energy research fellow at Rice University's Baker Institute in Houston. She wants the federal government to require that oil companies maintain a set gasoline inventory as a way to protect against sudden supply disruptions.

"We could end up in a situation where I literally can't get to the grocery store because I can't get fuel," Jaffe said.

The disruption from Katrina and Rita, which hit the Texas-Louisiana border Sept. 24, cost American consumers dearly.

How much is difficult to say. But in the week after Katrina hit, the nationwide average gas price jumped from $2.65 per gallon to $3.12. Prices stayed above their pre-Katrina level for two months.

The higher prices during those two months cost American drivers more than $5 billion, a rough estimate based on federal government data tracking gasoline prices and consumption in autumn.

Although pump prices have been falling for about three weeks, they are still higher than they were before Katrina. The nationwide average stands at $2.85 per gallon, according to the AAA auto club, and is dropping by a penny per day.

Although they worry about the refineries, some analysts say last year's hurricane season provided one reason for hope. When gasoline prices started soaring and supplies ran low, imports rose to meet the demand, with much of the gas coming from Europe. That kept prices from climbing even higher, and analysts say the same thing would happen again if the Gulf Coast refineries suffered another direct hit.

"You've got to take some comfort from last year," said John Kingston, who directs oil coverage for the Platt's energy information service. "Fears of the apocalypse didn't take into account just how flexible this market can be."

So far this year, no storms have seriously threatened the Gulf Coast. But the oil markets still keep a nervous eye on the weather.

Oil futures on the New York Mercantile Exchange dropped $1.90 Monday to $70.61 per barrel after sometime-Hurricane, sometime Tropical Storm Ernesto veered toward Florida, safely east of the gulf's oil patch. Last week, the storm's approach help push prices higher.

"There's quite a large fear factor in the marketplace right now," said Alex Montano, managing director of the C.K. Cooper & Co. investment bank. "You have Ernesto come into the gulf, and you see prices react immediately."

Given the destruction of last year's storm season, fear is understandable.

The federal government last compiled an update of the damage to the oil industry in mid-June. By then, nine months after Rita, 68 offshore oil platforms remained evacuated. The amount of oil blocked from reaching the market each day totaled nearly 180,000 barrels, or about 12 percent of the gulf's former oil production. Several analysts believe the current figure is closer to 10 percent.

In all, Katrina and Rita removed from the marketplace about 166.3 million barrels of oil between late August 2005 and mid-June 2006. That's nearly a third of the gulf's average annual production _ 547.5 million barrels.

Onshore refineries have fared better. All are running again, most at comparable levels to last summer's.

Repairs, however, have been expensive. The storms have cost Chevron Corp. about $2 billion, a figure that includes both repair expenses and money lost due to reduced oil production from the company's Gulf of Mexico wells.

Chevron even had to scuttle its damaged $250 million Typhoon platform, sinking it to create an artificial reef for marine life. The company sold off the Typhoon oil field for an undisclosed sum, reasoning that it was already past its peak and would cost too much to reopen.

"For Chevron, do we want to spend the money to bring that back or do we want to put it into one of our other projects?" spokesman Mickey Driver said.

Chevron has tried to learn from last year's storms by changing emergency plans. The company has signed contingency contracts to supply trailers to its Gulf Coast workers in case they lose their homes in another storm. It has issued gulf employees bags that contain emergency instructions and phone numbers and are designed to hold each employee's laptop. The company has also established a backup office in case it needs to evacuate its New Orleans office again.

"You take all your stuff with you," Driver said. "You don't know when you're coming back."