Oil prices surge to new highs

The potential damage to oil platforms, refineries and pipelines that remain closed along the Gulf Coast drove energy prices to new highs Tuesday, with crude futures briefly topping $70 a barrel and wholesale gasoline costs surging to levels that could lead to $3 a gallon at the pump in some markets.

Companies scrambled planes and helicopters to get an aerial view of their assets, and they began escorting some previously evacuated workers back to offshore facilities to conduct detailed inspections of rigs and underwater pipes. Some producers found that a rig or platform had disappeared, drifted or listed, while others reported that damage appeared minimal.

Onshore, flooding from Hurricane Katrina is likely to have caused enough damage to some refineries that it could take weeks, and possibly a month or more, before operations return to normal, analysts said.

Indeed, the production and distribution of oil and gas remained severely disrupted by the shutdown of a key oil import terminal off the coast of Louisiana and by the Gulf region's widespread loss of electricity, which is needed to power pipelines and refineries.

"It's ugly," said Lawrence J. Goldstein, president of the New York-based nonprofit Petroleum Industry Research Foundation. "Power is a problem, but the water issue is unbelievable."

To avert a severe supply crunch, Goldstein said the government should relax summer gasoline specifications to immediately free-up motor fuel supplies otherwise being held in storage until Sept. 15. He said the United States should also seek help from European nations, which might be willing to lend, exchange or sell gasoline and other fuels out of their own inventories.

The trading frenzy on futures markets reflected the uncertainty and fear about the full extent of the damage Katrina inflicted, as well as the constraints being felt where actual shipments of gasoline, heating oil and jet fuel are bought and sold.

"This is an extremely serious situation," said Tom Kloza, director of the Oil Price Information Service, based in Wall, N.J.

Light sweet crude for October delivery rose $2.61 to settle at $69.81 a barrel, a record close since trading began in 1983 on the New York Mercantile Exchange. Prices had reached as high as $70.85, an intraday high on Nymex, although still below the inflation-adjusted high of about $90 a barrel that was set in 1980.

September gasoline futures rose 41.39 cents to settle at $2.4745 a gallon on Nymex, where trading was halted briefly after the exchange's 25-cent trading limit was reached. Heating oil futures climbed 16.71 cents to $2.0759 a gallon.