Gas prices spurt as Gulf's rigs, refineries brace for hurricane Isaac (+video)
For safety, about half the oil refineries in the Gulf region have shut down as hurricane Isaac approaches. Gas prices are up 4 cents a gallon over a week ago – and will go higher if down time is extensive.
Just before millions of Americans get ready to hit the road for a Labor Day getaway, the price of gasoline is on the rise. Blame hurricane Isaac.
In advance of the storm hitting the New Orleans area, about half of the refineries in the storm's path had shut down for safety reasons. With the Category 1 hurricane starting to slow down and gather strength Monday afternoon before coming ashore, concerns are rising about the potential for flooding and electricity outages. Pipelines that send crude oil north to Chicago and gasoline east to Atlanta and the East Coast could also be shut down. And, it will take days to know whether offshore oil rigs, which have also been shut down ahead of Isaac, sustain damage.
On Monday, the price of gasoline on the futures market ran up 28 cents a gallon. On Tuesday, it backed off about 4 cents a gallon, but if it doesn’t come down a lot more, consumers will start to pay much more when they go to fill up the family sedan.
At the pump, gas prices are up about 4 cents a gallon to $3.76 from a week ago, up 27 cents a gallon from a month ago, and up 15 cents a gallon from a year ago, according to AAA.
Seem like déjà vu?
After hurricane Katrina wreaked havoc in New Orleans and the Gulf Coast region in August 2005, the price of gasoline spiked by 40 cents a gallon – from $2.65 a gallon to $3.04 in a week.
Energy analysts say it’s too early to make similar predictions. Isaac is a less powerful a storm than Katrina. In addition, the oil industry learned a lot from 2005 and, presumably, will get refineries back up and running more quickly.
In a best-case scenario, refineries in the Gulf region remain shut for a couple of days. “That will push up gasoline prices,” agrees Sander Cohan, a principal at Energy Security Analysis Inc. (ESAI) in Wakefield, Mass. “But it’s not as bad as it could have been.”
That’s because gasoline inventories are plentiful, and after Labor Day demand for gasoline starts to diminish, he says. “It really depends on how many refineries shut down,” he says.