Natural gas prices have benefited from the damage caused to rigs and pipelines in the Gulf of Mexico by Hurricane Andrew. But energy industry analysts say the rise may only be temporary.
"This industry has tremendous resolve when it comes to getting fixed, to making repairs," Robert Christensen of New York-based Mabon Securities Corp. "The industry has had contingency plans for something like this for years."On Thursday, the U.S. Minerals Management Service said damage to platforms and pipelines off the Louisiana coast last week was much greater than originally thought. Offshore rigs south of Morgan City, La., sustained the most damage.
Scott Sewell, director of the service, said some 166 platforms and satellite operations were harmed with damages estimated at $100 million.
"I think it still has the potential to rise slightly," Sewell said.
The agency was still receiving damage reports. Price increases should only be temporary unless it takes more than a month from when the hurricane hit to repair the bulk of the damage, he said.
Sewell said as much as 2.75 billion cubic feet of gas was out of daily production, out of the roughly 15 billion normally produced each day.
Earlier, the Minerals Management Service said about 1 billion cubic feet of gas had been lost temporarily.
"It's a dramatic increase," said Peter Beutel, of Pegasus Econometric Group Inc. in Hoboken, N.J. "What it will mean is probably higher prices for consumers. And the consumer gets passed along more of the price increases in natural gas than commercial users."
Many commercial users can switch to oil if gas prices become uneconomical. Although the average homeowner does not have that luxury, analysts said the switch to other sources by big commercial users would tend to increase the supply of gas, lessen demand and send prices back down.
"One has to think we'll see a pull back," Beutel said.
Oil production rigs in the gulf were also damaged, but oil supplies are bolstered by imports while natural gas comes almost exclusively from domestic wells or from Canada.
About 2 percent of the nation's oil production capacity was damaged, while 5 percent of the natural gas capacity was knocked out, Sewell said.
One key loss in natural gas has been a pipeline from Eugene Island, La., to the mainland, which has cut off 37 oil and gas platforms.
"They're in the process of fixing it and when it comes back, some of the lost production will also come back," Christensen said.