The Sunday Times: £1 litre looms as US oil firms target European fuel supplies: “Aerial photographs of Shell’s Mars platform, which produces 220,000 barrels of crude per day, showed collapsed equipment on its deck.”: Sunday 4 September 2005
By Carl Mortished, International Business Editor
THE economic damage from Hurricane Katrina will soon be felt in Britain with petrol prices possibly soaring as high as £1 per litre.
Flood-damaged American oil companies are expected to turn to European refineries for alternative supplies of road fuel, forcing up the price of petrol and diesel in Britain.
Concern that a tenth of America’s refining capacity lies under water sent the wholesale price of petrol rocketing on the NYMEX futures exchange in New York and yesterday shock waves raced across the Atlantic and buffeted Rotterdam.
Anticipating a surge of demand from US buyers, traders in Europe’s petrochemical capital pushed up the price of bargeloads of unleaded petrol by $50 (£28) per tonne to a record $801 (£445) per tonne. If these levels persist, petrol retailers in the UK will have little choice but substantially to raise the price of fuel at the pump, industry experts say.
“The Rotterdam market sets the price for European oil companies,” Stephen Brooks, an analyst at Wood Mackenzie, a leading oil consultancy, said. “If Americans are prepared to pay $800 per tonne for gasoline, they are not going to sell it to British retailers for less.”
Wood Mackenzie calculates that a retailer buying petrol at yesterday’s Rotterdam price would be forced to charge more than 99p per litre to meet his costs and pay taxes.
The effects of the hurricane in the southern states have quickly moved north and north-east, pushing up the price of fuel to motorists in New York and Chicago, whose petrol retailers are linked by pipelines to the vast refinery complexes of Louisiana.
The price of crude oil subsided yesterday from peak levels of more than $70 per barrel as news emerged that Washington is prepared to release emergency stocks. However, no new refinery plant has been built in the US since the 1970s and the industry is running flat out to supply the market. Refiners are forced to tweak valves and patch up pipes to meet soaring demand.
Struggling to reach facilities isolated by flooding and road closures, the oil multinationals were unable to assess whether it would take days, weeks or months to bring producton back to normal levels. Several Gulf of Mexico oil producers, including BP, suggested damage was not extensive to their platforms but the real problem remains not the wells offshore but the refining infrastructure.
Fears are mounting that US motorists will be charged record prices as they fill up their tanks for the Labour Day weekend. Wholesale gasoline futures prices are already exceeding the current retail price and industry experts are predicting $3 (£1.66) per gallon by the weekend, close to the all-time high of $3.11 (inflation-adjusted) in 1981.
Lack of information about the condition of hundreds of offshore platforms and rigs in the Gulf of Mexico is keeping the oil market on tenterhooks. Aerial photographs of Shell’s Mars platform, which produces 220,000 barrels of crude per day, showed collapsed equipment on its deck.
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