By the time Hurricane Rita made landfall last Saturday, her intensity had declined to category three, and damage on shore was less than feared. Earlier in the Gulf of Mexico, however, Rita was a monster category five storm in the heart of the oil- and gas-producing region. The Minerals Management Service reports that virtually all of the Gulf oil production remains shut in, together with 80 percent of natural gas production. Crude oil prices have remained stable, thanks to imports and potential releases from the Strategic Petroleum Reserve. However, 12 major refineries with 18 percent of the nation?s capacity remain closed, many because of a lack of electricity. Gasoline prices have increased, although not dramatically. Natural gas consumers have not been as fortunate - - the price for November delivery closed yesterday at $14.10\/ MMBtu, nearly $2 above the price one week ago. In the last four months the price of natural gas has doubled. A host of petitioners are appealing to Congress for relief from high oil and gas prices through subsidies of various kinds. Offsetting high prices with subsidies is government?s first line of defense against high prices, but this strategy has serious drawbacks. While reducing costs to some consumers (usually large users), it shifts these costs to taxpayers. Moreover, it may increase consumption by effectively reducing fuel costs. One might have felt sorry for the president this week when he was forced to ask consumers to become energy "conservers." Uttering the words was clearly painful. As I reported in last week's column, much more gas was being placed in storage than expected in the first weeks after Katrina. Yesterday's report held no such mystery - - the storage build for the week ending September 23 was in line with projections after accounting for damage in the Gulf and some decrease in consumption. How much Rita affected storage will not be known until next week. Gasoline prices receive the most attention, but the natural gas situation is more serious. Significant additional amounts of natural gas in the form of imported LNG are not expected for at least two years. Even before the hurricanes, gas production in the U.S. was down compared to last year, and Canadian production was flat, despite alluring prices. High gas prices will remain the bludgeon that forces North America to live within its limited natural gas supplies. As long as buyers continue to compete for these supplies, prices can be expected to keep going up.