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Hurricane Katrina's continuing disruption of a substantial portion of
the Gulf Coast's vast network of refineries and pipelines is pushing
the U.S. closer to a 1970s-style energy crisis, straining the oil
industry's ability to deliver gasoline from Florida to Colorado,
sending prices into uncharted territory and triggering panic among
drivers in some areas.

Long gas lines were reported in Denver, Indianapolis, Hartford,
Conn., Atlanta and Orlando, Fla., among other cities. In Charlotte,
N.C., between 13% and 15% of stations had no gasoline and prices have
soared as much as 70 cents a gallon in those stations that still have
fuel to peddle, said Tom Crosby, a local AAA official there.

BACK TO THE '80S

President Bush took the unusual step yesterday of urging Americans
not to buy gasoline if they don't have to. "Americans should be
prudent in their use of energy," he said in brief Oval Office
remarks. "Don't buy gas if you don't need it."

The president also made it easier for tankers to bring in gasoline
from Europe, which has excess capacity for the fuel as motorists
there increasingly buy diesel-powered cars. Wednesday, Mr. Bush
temporarily lowered U.S. environmental standards that also eased the
way for European gasoline.

The core of the unfolding situation is that four days after Hurricane
Katrina pummeled the Gulf Coast, eight major refineries are still
shut down and several could require a month or more to restart. In
addition, there are early rumblings in the industry of significant,
unreported damage to offshore pipelines, energy-gathering hubs and
producing platforms that could take months to repair.

Neither Exxon Mobil Corp. nor Chevron Corp. released more than the
briefest details about their offshore facilities. Royal Dutch Shell
PLC reported damage to three key facilities: offshore producing
platforms Mars and Cognac and a hub facility that gathers oil and gas
from large deep-water platforms.

Shell reported yesterday that its Convent, La., refinery could
initiate a restart in "about a week." Chevron said its large
Pascagoula, Miss., refinery had been saved by a dike built in 1998
that "prevented catastrophic damage." Exxon said its giant Baton
Rouge refinery was having pipeline and transportation issues and
running at "reduced rates until normal feedstock supply and product
movement is restored."

Last year, Hurricane Ivan, a less-powerful storm, hurt oil production
for months, pushing up energy prices world-wide after it upended
pipeline networks in the Gulf of Mexico. The price of crude rose from
$44 to above $50 for two months.

There was some good news. Valero Energy Corp. said power was restored
to its St. Charles, La., refinery and Marathon Oil Co. said its
Garyville, La., refinery could be producing gasoline by early next
week. Two idled pipelines that had hampered fuel deliveries to the
East Coast are now being brought back on line. Colonial Pipeline Co.,
knocked out of action by Katrina, said it was operating at 40% of
capacity, with about 61% of capacity expected by day's end.
Plantation Pipe Line Co., which is majority-owned by Kinder Morgan
Energy Partners LP, said it resumed limited service Wednesday.
Plantation said it had been able to restore about 150,000 barrels of
capacity per day, or nearly 25% of its average daily throughput.

Whether a true energy crisis emerges -- with persistent fuel
shortages, soaring gas prices and a wallop to the economy -- will
depend on how quickly the onshore and offshore infrastructure gets
back up and running, how deftly the industry and government handle
fuel distribution in the meantime and, critically, whether large
numbers of consumers panic.

A rush to fill gasoline tanks in large parts of the country would
quickly drain stockpiles, leading to shortages, hoarding, long lines
and even sharper price spikes. If every driver in the U.S. fleet of
220 million vehicles topped off his tank with 10 gallons, that would
be an additional 2.2 billion gallons of demand for gasoline and
diesel inventories that stood on Aug. 19 at 8.19 billion gallons and
3.23 billion gallons, respectively.

"In terms of the scale and impact on the American market, this is
comparable to the oil embargo" of 1973 and 1974, said Jay E. Fakes,
head of the federal Energy Information Administration from 1993 to
2000. The only answer, he says, is immediate conservation. His call
for drivers to cut back was echoed by such oil-industry heavyweights
as the American Petroleum Institute and the Petroleum Marketers
Association of America.

The industry's ability to snuff out the gasoline-price spike is
critical because if the crunch persists, it has the potential to
significantly slow the U.S. and global economies or even trigger a
recession. American consumers kept spending strongly through this
summer even as crude-oil prices soared, largely because other
factors -- low interest rates, rising home values and cheap imports --
offset the sting of higher prices at the pump. Their spending has
been a linchpin of world-wide economic growth.

But signs of stress are emerging. Home values may be peaking. The
government reported yesterday that the personal-saving rate dipped
into negative territory for just the first time since the weeks after
the Sept. 11, 2001, terrorist attacks, suggesting consumers are going
into debt to support their spending habits. A sustained gasoline-
price shock, many economists warn, could help tip the economy into a
recession.

Gasoline stations in some parts of the country say supplies are
drying up. Worst hit are the unbranded retailers -- stations that
aren't affiliated with a major oil company such as Exxon or Chevron
but still account for about one-third of U.S. gasoline sales. Jenny
Love, a spokeswoman for Love's, an Oklahoma City-based chain of 160
interstate and highway locations, said some of the company's outlets
were out of both gasoline and diesel fuel. "The unbranded retailer is
at the bottom of the totem pole," she said. "There's nothing we can
do about it."

Some service stations in gas-crimped areas like Atlanta were charging
in excess of $5 a gallon for gas, before a gubernatorial state of
emergency forced them to lower the price. The White House warned that
federal officials would have "zero tolerance for price-gouging."

Cary Gavant, a 58-year-old Atlanta broker, says he conserved fuel
last night by driving more slowly than usual on the 50 miles north on
I-75 toward his suburban home from Atlanta and noticed that many
other drivers were doing so, too. "The thought of not having gasoline
was terrifying," he said.

While the triggering event for the country's energy squeeze was the
destruction Katrina unleashed on the vital gasoline-producing region
of Louisiana and Mississippi, the scene was set for this catastrophe
by both drivers and the energy industry. U.S. drivers pump 11% of the
world's crude oil into their tanks in the form of gasoline, and
increasingly over the past couple of decades they have been buying
gas-guzzling SUVs and pickup trucks.

EPA Administrator Stephen Johnson12 discusses why fuel rules were
waived in order to increase capacity out of the Gulf Coast region.
Plus, WSJ's Gerald Seib discusses13 the Bush administration's plan to
release oil from government stockpiles. And AutoNation CEO Mike
Jackson talks about how Katrina may affect the auto industry14.

At the same time, the oil industry has been reluctant to invest in
new refinery capacity because of historically low returns, even while
refiners have pared back inventories to beef up margins. This
reluctance has shrunk U.S. and international spare refining capacity,
creating a world-wide gasoline-delivery system hard-pressed to cope
with a major disruption such as the one wrought by Katrina.

Even though these twin trends were well-known, the scope of the
disruption has caught even long-time oil-refining veterans by
surprise. "In my 30 years, I do not remember a time like this," says
Tom O'Malley, former chairman of Premcor Inc., a major U.S. refiner
acquired this year by Valero. "It is absolutely clear that a
significant amount of refining capacity that is currently down will
take time to come up. And I don't think it's a matter of days. For
some refineries, it could be a matter of months. There is certainly
going to be a domestic product shortfall."

Still, Mr. O'Malley doesn't believe the U.S. is headed for an energy
crisis. The rocketing wholesale and retail gasoline prices should
fall back soon, as tankers full of gasoline from Europe begin
arriving. "I think the industry, you will find, will do an amazing
job of coming up with supply. It's a question of weeks, but this is
no long-term problem."

Industry experts said they expect the refineries hardest hit by the
hurricane to be out of service for more than a month since flooding
can ruin the electric pumps that send crude oil through a refinery's
complex system of pipes. "It looks quite serious," said Bob Funk, who
recently retired as head of planning from Citgo Petroleum Corp., a
U.S. refiner and subsidiary of Venezuela's national oil company. Mr.
Funk expressed particular concern for a plant run by Exxon Mobil and
Petroleos de Venezuela in Chalmette, La., which is on the Mississippi
River near downtown New Orleans. Exxon Mobil said it couldn't provide
any information on potential damage at the Chalmette refinery.

The extent of the probable damage to the plants struck by the storm,
he says, is likely to be more than the Gulf Coast work force can
repair, meaning refiners will have to bring workers in from other
parts of the country. That and the extensive flooding are likely to
slow refinery repair efforts. Even when the refineries are up and
running it is unclear whether they will have adequate staffing, given
the flood damage in surrounding communities and neighborhoods where
workers live.

And while European traders reported as many as 20 bookings in the
past two days for tankers to carry gasoline across the Atlantic, the
shipments won't provide immediate relief. The ships are scheduled to
load gasoline at European ports later this month but will take as
long as three weeks before reaching East Coast ports like New York.
On top of that, traders are finding it difficult to find available
ships. Rates for trans-Atlantic voyage have soared in the past few
days as shipbrokers try to line up tonnage.

While most attention was on the onshore infrastructure, there were
ominous signs of damage to the offshore platforms and pipelines that
produce one-quarter of U.S. oil. Shell reported that its West Delta
143 platform, which serves a pipeline hub, needed substantial
repairs. Less than 20% of energy production within the Gulf of Mexico
had been restored yesterday, according to the federal Minerals
Management Service. Four days after Hurricane Ivan last year, 60% of
production had been restarted, the agency said.

Ivan scrambled numerous critical underwater pipelines, essentially
leaving functional producing platforms with no way to get the oil and
gas to shore. Robert Bea, Shell's former chief engineer in the U.S.
and a longtime student of the impact of hurricanes on the Gulf's
energy infrastructure, says he has heard from a network of oilfield
workers that the damage to pipelines and platforms could be "10 times
what we saw in Ivan."

Even before Katrina, the refining industry faced a severe capacity
crunch, a problem that promised to limit the prospects for cheaper
gasoline, diesel and jet fuel for at least several years. Nor is it
exclusively a U.S. problem: Growing demand for oil from China, India
and other rising powers is aggravating the shortfall in refining and
threatening to keep prices elevated for years.

While global demand is expected to grow by nearly two million barrels
a day this year -- from 82.5 million barrels a day last year -- the
world's capacity to refine and process crude oil is expected to grow
by less than half that, according to the Petroleum Industry Research
Foundation.

For these reasons, Larry Goldstein, president of the Petroleum
Industry Research Foundation, a New York-based group, said that the
release of oil from the Strategic Petroleum Reserve and increased
gasoline imports from abroad won't fundamentally address the
situation. "How could this not be a major problem for an indefinite
period of time?" he said. Mr. Goldstein said he expects sustained
high gasoline prices as demand exceeds supply. "It's powerful and
it's ugly," he said. "But it's true."

--Chip Cummins and Steve LeVine contributed to this article.

Write to Russell Gold at russell.gold@wsj.com15 and Thaddeus Herrick
at thaddeus.herrick@wsj.com16