U.S. fuel crunch fear spreads in Ike's wake

By Bruce Nichols and Eileen O'Grady

HOUSTON (Reuters) - Fears of U.S. fuel disruptions spread on Sunday as a quarter of the nation's energy production lay idled in the wake of Hurricane Ike's direct hit on the Houston oil hub, threatening to shrink already thin supplies.

Prices at the gas pumps shot higher while oil companies scrambled to check their refineries and platforms in the Gulf of Mexico for damage from the biggest interruption to U.S. fuel supplies since Hurricanes Katrina and Rita in 2005.

U.S. President George W. Bush said federal and state authorities were watching for gasoline price gouging and added that it was too early to determine the extent of the damage to U.S. energy infrastructure.

"It's a little early to fully assess where we stand, although I can say that one of the pipelines coming out of the Gulf Coast area is running," Bush said.

Some 16 refineries were shut ahead of the storm along with all of the crude production in the Gulf of Mexico and a swath of pipeline, port and ship channel operations.

Early indications from emergency officials showed the storm created less flood damage than initially feared -- a sign of a possible quick recovery -- but companies warned that supply problems were still likely in the near term.

"It may not be possible for us -- and other manufacturers -- to maintain normal supplies in the coming days," Chevron Corp said in a statement.

U.S. gasoline prices have jumped more than 11 cents to $3.795 a gallon since Friday, the biggest two-day increase since hurricanes Katrina and Rita in 2005, according auto and travel group AAA's daily survey.

A spokesman for American Automobile Association said drivers should brace for pump prices over $4 in the coming weeks as Ike's impact hits U.S. gasoline inventories that are already running at their lowest levels since November 2000.

BIG HURDLE

Fifteen Texas oil refineries, including the giant Exxon Mobil Corp refinery in Baytown, were shut down as a precaution ahead of Ike, while another in Louisiana remained shut in the wake of Hurricane Gustav two weeks ago. Together, they make up a quarter of U.S. fuel production capacity.

A Reuters witness said nine of the shuttered refineries around Houston, Texas City and Beaumont showed no visible signs of flooding or significant damage.

Even so, it could be up to nine days before fuel production returns to normal and gasoline shortages are possible in the meantime, U.S. Sen. Kay Bailey Hutchison of Texas said after a briefing from federal emergency officials.

Energy analysts said the biggest hurdle to restarting refineries could be restoring power, after utility officials warned of a slow recovery from Ike.

The storm also halted crude oil production in the Gulf of Mexico, representing a quarter of U.S. output. Oil companies said Sunday they were flying workers back offshore to check for damage and restart operations.