Oil Industry Urged to be Careful

In the wake of hurricanes Katrina and Rita the US oil industry is being urged to think carefully about how it restarts production.

Rob Laughlin, director of energy at the oil brokers GNI-Man Financial, said that the US must learn not to "put all its eggs in one basket" and must spread its refining capacity more evenly by building new refineries in other areas.

The vast majority of the US's refineries are in the Gulf region, which is the most vulnerable to hurricanes.

Katrina pushed crude prices to a record $70.85 a barrel but oil prices have since dropped particularly because the refineries appear to have emerged from Rita unscathed.

Speaking to BBC Radio Five Live's 'Wake Up To Money' programme, Mr Laughlin stressed that it was problems with refineries, not supply, that were keeping prices high.

He said that current oil prices are hugely over-inflated, saying: "I would say oil prices should be nearer $50 a barrel."

"There is no shortage of crude, I can't emphasize that enough. What we actually need is more refining capacity.

"I think the Americans have learnt a lesson. They rely too heavily on small isolated areas, and when you have got nearly a quarter of your production of oil and gas coming out of the Gulf of Mexico, perhaps they should think they should be putting some of their new refineries if they decide to build them, well away from the Gulf."