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Hurricane Rita

Rita may strike Florida in its energy lifeline

Disruption of supplies from Texas could leave the state with shortages at the pump and electric outlet.

By LOUIS HAU and STEVE BOUSQUET
Published September 23, 2005

Gov. Jeb Bush warned Thursday that the "double whammy" of Katrina and Rita could have a "devastating impact" on gasoline supplies and prices in Florida and cause problems for electric utilities, which rely heavily on natural gas produced on the Gulf Coast.

"Our concern right now is availability, first and foremost," Bush told reporters. "I'm very concerned about it. I just anticipate this storm is going to have a devastating impact on fuel supplies."

Reinforcing Bush's warning, the Florida Reliability Coordinating Council, which oversees most of the state's power grid, once again Thursday appealed to the public to conserve electricity, citing the risks to natural gas production in the gulf. Natural gas, mostly delivered by pipelines from Louisiana and Texas, accounts for about a third of all power generation in peninsular Florida.

If the supply of natural gas falters because of Rita, then a number of Florida power plants that run on gas will have to start running on diesel fuel, said the council's chief executive, Ken Wiley.

"If you run those plants on back-up diesel for days, you will quickly use up the reserves and there are not enough tank trucks around to refuel," Wiley said. Hence, the call to conserve, though he acknowledged it was hard to gauge the effectiveness of such actions.

In Tallahassee, the governor met with oil industry representatives to develop a plan for dealing with what he anticipates may be a severe shortage in Florida. He said his powers under executive orders are limited.

Bush shed his sport coat in the Capitol, where most thermostats are set at 78 degrees to save electricity. He acknowledged that by voicing fears about a gasoline shortage, he could be spurring panic buying by consumers, which would make things worse. But he said the likelihood of a shortage outweighs those concerns, making it important for him to "be transparent" with consumers about the problems that lie ahead.

"I'm concerned about that, but I'm more concerned about the need to communicate the fact that, looking over the horizon, we have a potential problem," Bush said. "I think it would be negligent to not say it, to say everything is great. It isn't great."

On Thursday, the average price for regular unleaded in the Tampa Bay area was $2.75 a gallon, down from an all-time high of $3 a gallon on Sept. 7, according to AAA.

But because of a jump in crude-oil prices in anticipation of Rita, some Florida wholesalers are already selling unleaded regular gas to gas stations for more than $3, including all taxes, according to Jim Smith, president and chief executive of the Florida Petroleum Marketers and Convenience Store Association in Tallahassee.

Those high prices won't show up at the pump until gas stations run out of their existing inventories and begin selling new shipped supplies of the higher-priced fuel. Under the state of emergency declared by Bush on Sunday, gas stations can only raise prices once they begin selling higher-priced fuel shipped by their suppliers.

Unlike other states in the Southeast that receive most of their gasoline via a network of pipelines, Florida gets nearly all of its gasoline and diesel via barge shipments across the gulf, mostly from Louisiana, Smith said.

While high crude prices directly lead to higher gas prices, panic buying by consumers can make matters worse by increasing demand and squeezing supplies, as happened after Katrina, Smith said.

"Consumers play a part," he said.

Smith said he is hopeful that Rita won't cause as much damage as first feared, noting that officials were hoping that it would weaken somewhat by the time it makes landfall. But he added that, "If it's catastrophic, all bets are off because it could get mud-ugly."

According to the American Petroleum Institute, refineries in Texas and Western Louisiana have combined refining capacity of 4.7-million barrels a day, about 27.5 percent of U.S. refining capacity.

A direct hit by Rita on the Texas Gulf Coast could have an enormous impact on U.S. energy markets, according to Denton Cinquegrana, markets editor with Oil Price Information Service in Wall, N.J.

"The projected path probably couldn't be worse," Cinquegrana said. "It's heading right for the nerve center of the (U.S.) petroleum industry."

Steve Bousquet can be reached at bousquet@sptimes.com or 850 224-7263. Louis Hau can be reached at hau@sptimes.com or (813) 226-3404.

[Last modified September 23, 2005, 02:50:29]