Kat's after effects ...Thursday, 1 September 2005, 05:58 GMT 06:58 UK
"Depending on what we learn in the next few days, this may be the biggest oil-supply shock since the 1970s," said Daniel Yergin, an analyst at Cambridge Energy. "We are now in the days of reckoning."
Katrina threatens petrol prices
US consumers are having to get used to spending more to fill up
Oil prices have fallen back from record levels after the US said it will release crude from its emergency stock following Hurricane Katrina. However, the price of gasoline jumped higher on concerns that refineries will take time to get back to full output.
Analysts have been warning that high petrol prices may deter consumers from spending and slow economic growth.
New York light crude cost $68.60 a barrel in Asian trading, down from the record $70.85.
Gasoline futures jumped 3% to $2.3050 a gallon (3.8 litres).
'Prime supplier'
Hurricane Katrina powered its way across the Gulf of Mexico earlier this week, damaging much of the oil infrastructure that was in its path before coming ashore and killing hundreds of people and devastating built up areas.
The city of New Orleans is to be fully evacuated and President George W Bush called Katrina "one of the worst natural disasters" the US had seen.
Katrina cost to top $25bn US scarred for years
Katrina is likely to have a "more lasting impact on refinery production and the distribution system" than previous hurricanes, the US Department of Energy said.
Oil companies are currently assessing the damage and many oil rigs and platforms are missing, while a number of major refineries have closed.
"The Gulf Coast is a prime supplier through pipelines now shut due to lack of power and ocean-going barges unable to load from ports eradicated by the storm," said David Knapp, an analyst at Energyintel.
"The loss of critical gasoline flows... will stress markets over the next few weeks," he added.
The US Minerals Management Service estimated that 95% of the Gulf of Mexico's oil output was out of service following the hurricane, as well as more than 80% of natural gas production.
'Days of reckoning'
That has raised concerns among many analysts, who now see petrol prices increasing nationwide to beat previous records.
According to the AAA motor club, gasoline costs an average of $2.62 a gallon in the US, compared with $1.86 a year ago.
"On a national average, we could hit $3.25 at the pump easily, potentially even by this weekend," said Jason Schenker, an economist at Wachovia. "This is going to cut into consumer demand."
Petrol prices keep on rising
Mark Routt of Boston-based Energy Security Analysis said that his "rule of thumb is that the national average pump price will typically be 65 cents higher" than the market price.
"Most of that will get passed to consumers within three weeks," he added.
While it is true that the US economy is still motoring - it grew at an annual rate of 3.3% in the April to June quarter - the worry is that a significant dip in consumer demand would slam the brakes on the recovery.
"Depending on what we learn in the next few days, this may be the biggest oil-supply shock since the 1970s," said Daniel Yergin, an analyst at Cambridge Energy. "We are now in the days of reckoning."