Hurricane Katrina floods energy markets with worry

Katrina has done more than devistate New Orleans--she has also put energy markets in a precarious position.

Oil prices spiked Monday as Hurricane Katrina tore through a stretch of Gulf Coast thick with pipelines and refineries, raising fears that already elevated gasoline costs could shoot higher.

For the first time, the price of crude briefly topped $70 per barrel in electronic trading before the market opened as the storm raced through one of the country's most important oil patches. The price tumbled later in the day, closing at $67.20, on news that President Bush would consider dipping into the nation's emergency oil reserve to prevent shortages.

By the time Katrina made landfall early Monday, the storm already had knocked 3 million barrels of oil off the market as companies such as San Ramon's Chevron Corp. evacuated their offshore platforms. Two drilling rigs used by Royal Dutch/Shell Group were drifting on the open sea Monday, while the fate of others remained unknown.

The hurricane represented the kind of sudden cut in oil production -- a "supply shock" -- that analysts had feared, hitting at a time when global demand for crude has strained the limits of available stocks. About 92 percent of the gulf's oil production shut down in advance of the storm, according to government figures.