Rita's glancing blow to Refineries

BREITBART.COM has some good news from the AP

The Cat 2 hurricane struck vulnerable oil rigs and refineries in Texas and Louisiana with less force than forecasters had first anticipated. This means that Rita's impact on fuel prices shouldn't be as drastic as first believed. Perhaps this will ease the speculator's jitters, or glee (guess that depends on your perspective!)

The Details:

Hurricane Rita smacked a key region for oil-refining with less force than feared on Saturday, although there were some early signs of damage.

Pump prices for gasoline and diesel fuel could rise if pipelines and oil refineries are slow to resume operations, and analysts said they were paying close attention to facilities in Lake Charles, La., and Beaumont and Port Arthur, Texas.

"There will be some modest disruption of supplies of gasoline and other products," said William Veno, an analyst at Cambridge Energy Research Associates "But I don't think it's going to be as severe a situation as Hurricane Katrina."

Power outages were reported across wide swaths of Texas and Louisiana, leaving more than a million customers without electricity and one utility spokeswoman said it could be weeks before service is fully restored.

Valero Energy Corp. said it will take two weeks to a month to repair and restart its 255,000-barrel-per-day Port Arthur refinery, which sustained "significant damage to two cooling towers and a flare stack."

But on a positive note, Valero said there was no serious flood damage at its Port Arthur facility and the company received reports that the lights were on at its refineries in Houston and Texas City, Texas _ plants that refine almost 300,000 barrels of oil per day. BP PLC spokesman Scott Dean said that was encouraging since "they're right next door to us there." BP's Texas City refinery processes 437,000 barrels per day.

Marathon Petroleum Co. said its Texas City refinery, which processes 72,000 barrels of crude oil per day, has power and sustained only minimal damage.

Is there more demand for refining capacity now? Perhaps some bold venture capitalists can come through when someone with a touch of foresight awakens to the profitability of the idea. Now, who can blame those oil companies, such as the ones cited by the AP article, from wanting to maintain the status quo. It's pretty good for them as is, considering that they process the oil and then get to sell it to Joe sixpack's gas station for a healthy markup. However, don't oil companies, and the refinery subsidiarities, require some type of government authorization in order to do business? IF they do, and considering the strategic importance to the economy and National Security, then the people have a vested interest in making sure prices are as fair as possible. But that doesn't mean Uncle Sam needs to break out the stick. Carrots may be called for instead.

What if Uncle Sam offered significant tax breaks in exchange for oil companies and venture capitalists investing in significant refinery capacity? That may encourage them to get off their tuffs. Besides, with more refinery capacity comes the ability to move more finished product quickly. The subsequent drop in prices for gasoline will most likely be offset by the increase in demand, as motorists become more willing to fill up at the pump more frequently. Oil companies may increase profit margins while serving the common good simultaneously! What a concept!

Instead of buying people's goodwill through needless pork, maybe the President and Congress can make the oil companies an offer they can't refuse. Genuine relief at the pumps will carry politicians further than pork-filled manipulations.

Leadership tends to do that.