Ike’s effect is felt at gas pump
Hurricane Ike held little sway over oil futures, which briefly slipped below $100 a barrel on Friday, but was felt at the gas pump as the focus shifted from offshore oil and natural gas platforms in the Gulf of Mexico to the giant refineries that stand in the storm’s path.
The breadth of the hurricane forced the precautionary shutdown of 13 Texas refineries, idling plants that process about 3.5 million barrels of oil a day and reducing operations at others -- about 25% of U.S. refining capacity.
The pipelines that serve the refineries also have closed, halting regular deliveries of gasoline and diesel to the Midwest and East Coast markets, Colorado, Arizona and elsewhere. Ports that handle fuel and oil imports and exports are closed as well. Spot shortages of gasoline were reported in the Gulf Coast and Southeast.
Gas prices in Omaha jumped 10 cents a gallon on Friday, said Darin Newsom, senior analyst at Omaha-based DTN, which tracks energy and agriculture markets.
The nationwide average price for regular self-serve gasoline ended a lengthy slide, ticking up less than a penny Friday to $3.675 a gallon, according to AAA’s daily price survey. But some motorists in Texas and other affected states were confronted by pump prices above $5 a gallon.
If all goes well, the refineries and pipelines could be restarted in a week to 10 days -- and consumers may not see much of a bump up beyond the 10-cent to 15-cent jumps already hitting some stations. But if, as expected, Hurricane Ike brings with it both devastating winds and 20-foot storm surges, refineries could be flooded and disabled for weeks or months.
“If we see some sort of dramatic problem, then we’ll see a spike across the nation . . . and it’s going to be at least 25 cents to 30 cents,” Newsom said. “It all comes down to how big the hurricane is when it hits and how long these refineries might be shut down.”
In the Gulf Coast region, gasoline supplies were already stretched because of refinery closures related to Hurricane Gustav. Though many of those plants have restarted, the wholesale price of gas in Houston has been rising sharply amid fears that the situation will worsen. That supply squeeze would spread much more widely if there are lengthy outages among the refineries.
Offshore, 97% of the Gulf of Mexico’s crude oil production was shut down Friday, and more than 93% of the natural gas production, according to the Minerals Management Service, an arm of the Interior Department. Many platforms were already getting a thrashing from Ike on Friday -- and damage could be greater than expected because of the storm’s massive size -- but most of the facilities were farther east and not expected to take a direct hit.
Oil prices shrugged off Ike and continued to decline, slipping below $100 a barrel Friday for the first time in more than five months. On the New York Mercantile Exchange, the cost of light, sweet crude for October delivery fell as low as $99.99 a barrel but finished the day at $101.18, up 31 cents. Oil consumption has slackened with a struggling economy, and refinery outages further reduce the need for crude.