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Off-Shore Refineries Prepare

Hurricane Rita (search) gained power and headed toward a collision with the nation's biggest concentration of oil refineries along the Texas coast, raising new fears about the nation's gasoline supply and prices at the pump.

Oil companies on Wednesday began closing refineries, including two of the largest around Houston, and several more seemed likely to be shuttered as early as Thursday.

Four Louisiana refineries are still out of operation from last month's Hurricane Katrina (search). Those plants accounted for agap that could strain the nation's supplies of gasoline, jet fuel and diesel.

Texas has 26 refineries that account for more than one-fourth of the nation's refining capacity, mostly along 300 miles of Gulf Coast from the Louisiana border to Corpus Christi. That's right in the path that weather forecasters predict for Rita, which became a Category 5, 175-mph behemoth Wednesday and was expected to make landfall this weekend.

BP PLC began closing its massive Texas City refinery, and Marathon Oil Corp. (search) followed suit at its plant nearby. Shell Oil closed its Houston-area refinery, which kept running through the last major Texas hurricane, Alicia in 1983.

"It was a split decision between taking a risk and playing that waiting game of seeing where it's going to land, and being sensitive to employees getting home," said David McKinney (search), a Shell spokesman. "Once we made the decision, everybody felt good."

Exxon Mobil Corp (search). said Thursday morning it had begun shutting down its Baytown refinery -- nearly as big as the BP and Shell plants combined -- and another in Beaumont.

Valero Energy Corp. announced late Wednesday that it was shuttering refineries in Texas City and Houston and operating in Corpus Christi with a limited crew.

The region is also home to many chemical plants, and they too began shutting down. Dow Chemical Co. and Lyondell Chemical Co. closed some plants, although others remained operating late Wednesday.

Meanwhile in the Gulf of Mexico, Rita began to take a toll on oil production, which hadn't yet fully recovered from last month's Hurricane Katrina. Fresh evacuations that began this week in the eastern waters of the Gulf spread farther west, one step ahead of the storm.

Rita threatens to compound the havoc caused by Katrina, which damaged oil platforms and knocked out refineries, four of which in Louisiana remain dark. They had accounted for about 5 percent of U.S. refining capacity and weren't expected to resume operations anytime soon.

Combined, the damage from Katrina and the precautionary evacuations due to Rita have slashed normal Gulf oil production of 1.5 million barrels a day by 73 percent, the U.S. Minerals Management Service said Wednesday.

Since Katrina evacuations began Aug. 26, the storms have cut more than 27 million barrels of oil production, or 5 percent of the Gulf's annual production, the agency said. Natural gas production was 47 percent below normal on Wednesday.

Oil and gasoline prices could spike again if Rita causes additional disruptions in supply, market analysts say. Katrina caused gasoline prices at the pump to spike above $3 a gallon in many parts of the country.

Oil prices climbed more than $1 a barrel on Wednesday, as traders calculated the possibility that Rita could damage oil-industry facilities on land or in the Gulf of Mexico. Heating oil jumped nearly 3 cents to $2.0387 a gallon, while gasoline surged more than 7 cents to $2.0531 a gallon.

Analyst Tom Kloza of research firm Oil Price Information Service said many of the Houston refineries are well above sea level and have withstood past storms. He called the reaction hysteria -- unless Rita scores a direct hit on the Texas refineries.

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