Gas Prices Soar After Hugo Shuts Refinery

Gasoline prices zoomed more than 2 cents a gallon Thursday on the New York Mercantile Exchange after Amerada Hess Corp. said Hurricane Hugo will shut down its 23-million-gallon-a-day Caribbean refinery for two months.

It brought the combined two-day Merc gain to more than 4 cents a gallon since the company began buying gasoline on the market Wednesday morning to replace gasoline production from its St. Croix refinery in the Virgin Islands.

After initially rising however, crude oil prices fell as traders realized the crude market would be depressed since the huge refinery would not be buying any crude oil for some time.

Unleaded gasoline October futures ended the day up 2.12 cents at 61.86 cents a gallon after trading as high as 63 cents on the Merc. Gasoline opened the day at 62 cents a gallon.

May Be Down for 60 Days

The rise came on top of 2.07-cent gain Wednesday when traders reacted to Amerada Hess entering the market for gasoline to replace output from the refinery, which produces almost all the company’s gasoline.

The refinery has a daily capacity of 545,000 barrels, or 22.89 million gallons. Its actual daily output was 400,000 barrels prior to the hurricane.

After declining comment all day, Amerada Hess issued a statement late Wednesday following the Merc close.

There has “been considerable damage to the plant,” it said. “The corporation . . . hopes to have the refinery in full operation in approximately 60 days.”

Despite the shutdown of the refinery, Amerada Hess said it “will maintain normal sales arrangements with all of its customers on the mainland of the United States.”

The company said the refinery supplies customers mainly on the East and Gulf coasts.

On Thursday, the company invoked the doctrine of force majeure on St. Croix loadings, declaring the refinery shutdown to be an act of God to protect itself from legal actions by customers over late deliveries.

Nevertheless, the spokesman said Amerada Hess stood by its Wednesday statement. Force majeure “will not affect the mainland,” he said.

The spokesman noted the St. Croix loadings of tankers for foreign markets are only a very small portion of the refinery’s output. “Almost everything we manufacture is sent to the mainland U.S.,” he said.

Alaskan Crude

Bill Hinton of Stotler & Co. in New York said the force majeure also protected Amerada Hess from having to accept crude oil it had contracted to take. The Amerada Hess spokesman declined comment.

But the spokesman added, “It is logical we won’t be running any crude for 30 days. We don’t know what the runs will be for the following 30 days and beyond.”

He said the refinery runs “all kinds of crude, but its base is Alaskan crude.”