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Tuesday, September 27, 2005 - Page updated at 12:00 AM

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Bush calls for energy conservation as scope of damage from Rita widens

WASHINGTON — President Bush yesterday urged Americans to cut back on car trips amid warnings that the energy disruption from Hurricane Rita could be worse than initially thought.

Although Rita spared massive refineries and chemical complexes in the Houston area, the first reports about damage to offshore production of crude oil and natural gas were grim.

U.S. offshore production across the entire Gulf of Mexico remained closed yesterday, meaning about a fifth of the nation's oil production has been shut down since Thursday. Even before oil workers evacuated offshore rigs in advance of Rita last week, Hurricane Katrina had knocked out 56 percent of Gulf oil production.

Even when energy companies restart their Texas and Louisiana facilities, U.S. refining capacity will be reduced by at least 10 percent for weeks or months.

Oil prices yesterday rose to $66.17 a barrel because of hurricane-related jitters while U.S. retail-gasoline prices increased for the first time in three weeks, the government said yesterday. The average U.S. retail price rose 5.2 cents to $2.80 a gallon, according to AAA, which reported that the price of regular unleaded in Seattle yesterday was $2.88.

Although Western Washington's gas comes from local refineries and not those that are affected in the Gulf of Mexico, experts say there's an indirect effect on gas prices here when they rise in the rest of the country.

Bush issued his call for conservation after receiving a briefing on the energy outlook. He urged Americans to avoid unnecessary car trips and encouraged federal workers to use public transportation or join car pools.

He directed federal agencies to curtail nonessential travel and to conserve electricity during peak hours when possible.

"If it makes sense for the citizen out there to curtail nonessential travel, it darn sure makes sense for federal employees," Bush said. "We can encourage employees to car-pool or use mass transit, and we can shift peak electricity use to off-peak hours. There's ways for the federal government to lead when it comes to conservation."

The White House also will be looking at ways to conserve, press secretary Scott McClellan said, although that doesn't include a change in the president's plans to return to the region this week.

Bush plans to travel to Beaumont and Port Arthur, Texas, tomorrow to get a better assessment of the damage to Gulf Coast refineries and other energy facilities. He returned Sunday from a three-day trip in which he stopped in four cities that have been bases for government response to the storm.

McClellan said it is important that the president get a firsthand look at emergency operations and lift the spirits of workers there.

"I know the president's visit yesterday to the joint field office in Baton Rouge was very much appreciated," McClellan said.

Bush also signaled that he is ready to tap the federal government's emergency oil reserves for the second time this month to boost energy supplies.

Many of the steps that he outlined yesterday were already in place because of Katrina. The Energy Department has drawn down at least 13.2 million barrels of crude oil from the government's Strategic Petroleum Reserve to keep oil flowing to refiners. Bush said he is willing to draw down more for Rita, if necessary.

Bush said he had instructed Energy Secretary Samuel Bodman, who briefed him along with Interior Secretary Gale Norton, to consider how the petroleum reserve can be used to help lower gas prices, with about two-thirds of Americans responding to recent polls saying high gas prices are causing them financial hardship.

The reserve holds nearly 700 million barrels of oil in four underground salt caverns along the Gulf of Mexico. While the caverns are protected by nature, the sites have surface buildings and a system of pipelines and pumps that are exposed to the elements.

The Big Hill site near the Texas-Louisiana border had "minor damage" from Hurricane Rita, and the status of another at West Hackberry in Louisiana is uncertain because access roads are flooded.

If oil is made available from the reserve, it likely will be in the form of a loan to specific refineries that would turn it into gas, Energy Department officials said.

"The storms have shown how fragile the balance is between supply and demand in America," Bush said. "We need more refining capacity."

Congress plans to move quickly this week on legislation aimed at providing incentives such as special government-backed insurance for refinery expansion or construction, along with provisions that are aimed at more energy production, especially natural gas. Other bills would ease some air-pollution requirements on refineries, open the Arctic National Wildlife Refuge in Alaska to oil drilling and allow states to override bans on natural-gas drilling in coastal waters.

Energy companies have long complained that the lack of new refineries has been a drag on the nation's energy-supply network.

Some consumer groups have accused oil companies of deliberately restricting refining capacity to keep gasoline prices high.

"They know when they make less gasoline, they make more money," said Jamie Court, president of the Foundation for Taxpayer and Consumer Rights, a Los Angeles-based group that frequently battles oil companies in court.

In addition to a lack of new construction, refining capacity has been affected by other factors. Years of heavy financial losses and a wave of mergers have wiped out many refineries, leaving the industry with only 148 fuel-making plants today, down from a peak of 324 refineries in 1981.

In the past decade, the industry has largely offset the lost production from refinery closures by expanding existing plants. At the same time, refiners have spent money in recent years to comply with more stringent environmental regulations. They have not increased production enough to keep up with the swelling demand for gasoline, diesel, jet fuel and other petroleum products.

Compiled from Knight Ridder Newspapers, The Associated Press, Reuters, Bloomberg News and the Los Angeles Times.

Copyright © 2005 The Seattle Times Company

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