Posted on 08/31/2005 5:43:25 PM PDT by M. Espinola
Storm disruptions to output in the Gulf of Mexico and nine weeks of falling gasoline supplies joined forces to pull regular unleaded gas prices to a fresh record -- and they're still nowhere near their peak, analysts said Wednesday.
There's a "surfeit of worry over gasoline supplies to much of the U.S. and gasoline prices have acted accordingly," said John Kilduff, an analyst at Fimat USA.
At the retail level, the average price for regular unleaded stood at an all time high of $2.619 a gallon Wednesday, according to AAA's Daily Fuel Gauge Report. That's a full 40.8% above the $1.860 of a year ago. See the data.
And unleaded gasoline for September delivery climbed as high as $2.90 a gallon, a level that market has never reached before See Futures Movers.
"This is shaping up to be a 1970s-style energy price shock," said Kilduff, in a note to clients.
And "$4 gasoline will likely be visited upon consumers in many areas," he said.
Hurricane Katrina, which hit the Gulf -- home to about 25% of U.S. oil and natural-gas production -- earlier this week, has halted the movements of 91.5% of the region's daily oil output, according to a Wednesday report from the Minerals Management Service. For comparison, Hurricane Ivan from late last year forced the daily shut in of only 83% at the height of its impact.
All in all, the storm has shut down about half the nation's refining capacity and about a quarter of domestic oil production," said Thorsten Fischer, an economist at Economy.com.
And on Wednesday, the Energy Department reported that gasoline supplies for last week fell 500,000 barrels, that's less than expected, but it still marks a ninth-straight weekly decline in inventories.
There's a "huge crisis in gasoline -- our worst fears are recognized," said John Person, president of National Futures Advisory Service.
Near term, he believes prices at the pump may reach $3 -- "possibly as high as $3.20 as a national average as early as late next week," he said.
But in late September, he sees prices backing down toward $2.35 to $2.50 for regular unleaded "as long as these refineries get on-line and we do not have further disruptions," he said.
Tom Kloza, chief oil analyst at the Oil Price Information Service believes most places will see gasoline prices "north of $3 a gallon."
That's bad news for the Labor Day weekend, traditionally a high-demand period that also marks the end of the summer driving season.
"Refinery capacity on the Gulf Coast has been shut down and it remains uncertain when operations will resume," said Fischer, in a weekly report.
"The lack of much-needed refining capacity is a serious upside risk for refined-product prices, which have already soared in the aftermath of Hurricane Katrina," he said.
The White House has said it will release some crude oil from the Strategic Petroleum Reserve in an effort to help alleviate the problem. See full story.
That "should be sufficient to compensate for any temporary shortage in domestic production as well as crude imports as the Louisiana Offshore Oil Port remains closed," said Fischer. But "the lack of refining capacity is a much more serious problem in the short term,"
"The problem is aggravated by the impending Labor Day weekend, traditionally one of the busiest times for travel in the year," he said.
At the moment, there are no signs of slowing consumption, with implied gasoline demand averaging almost 9.4 million barrels per day during the four weeks ending August 26 -- an increase of 1.2% compared to the same period one year ago, which itself saw extremely strong demand, he said.
"Prices may spike further given strong demand and constrained supply," he said.
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They must be unaware of the situation in Atlanta...high-grade BP/Amoco gas is on the plus side of $6/gallon.
I'll bet that the spike in gas prices causes a recession.
It's already $3.38 in Illinois, and set to go even higher. Prices jumped almost $.50 from just last night.
As I rolled down the road tonight, there are 4 gas stations.
Stewart's charged $3.19/gallon for regular. Not one car.
Sunoco & Gulf charged $2.99. They did good business.
Mobil charged $2.76. There were lines of cars spilling out onto the roadway.
[This is upstate NY, not the city]
We have shortages and some stations are completely out already and no new shipments on the way. It is going to be bad, at least where I live.
There has been a panic in Georgia. It took me over an hour to get home today. I was blocked by all the gas lines spilling into the streets. There were rumors all day about how there was going to be shortages and gas stations were going to close at either 3:00 or 5:00. The governor has frozen prices- if wholesale goes up then the prices can go up correspondingly. Wholesale has gone up 90 cents in the last two days. I think it is inevitable that there will be shortages in the South and East Coast states. This will surely cause a recession. I hope the Dems and environmental wackos are proud of themselves. They are completely to blame for the situation we find ourselves in-not building refinerys or drilling for our own gas.
Wal-Mart - Austin,TX reporting in at $2.749/gallon
We live in Central Flordia and I always keep spare gas for the generator during hurricane season. After rotating the old supply today and going to get my refills, every gas station in my area was having a run on gas. The lines at 6:00pm were around the corner and they had already run out of regular unleaded. The station down the street was already dry. While prices were around $2.79, I fear we are going to have a shortage.
Give me about 10 hours and I'll be there! It went from 2.55 to 3.00 in a matter of hours here in E MO
Good point. The Feds chimed in today saying they will release some of the emergency reserve of crude, but this needs to be refined before it can be available or effective at reducing the price of gas at the pump. That could take a month or two. Curiously, the reserves are located in caverns near the hurricane-damaged area.
But the petroleum reserves are only about 1 month's supply of crude for the country. Bush and company have some difficult choices to make. This might be a good time to institute tax breaks for high-mileage vehicles. People who insist on driving gas guzzling SUVs and oversize trucks might have to start paying the price for their choices, because the nation needs to conserve its consumption of fuel right now.
As for the recession potential, many factors come into play. But a big spike in gas prices has an effect on all consumables that truckers haul, too.
How far Upstate are you guys?
I thought we would see $5 once the Iranian nuclear weapons showdown got under way, adversely effecting the flow of crude out of the Persian Gulf, maybe this winter. Now with these insane prices of $6ish in Atlanta what are we going to be confronted with, $8 to $10 a gallon!?
Guess what? I use high test ....nice eh?
We were all surprised because that Mobil station usually is a nickel higher than everything else! You just couldn't navigate around that place at all...cars everywhere trying to save 40 cents a gallon. Can't really blame them, those savings add up.
One of my friends paid $3.40/gallon today down in Fishkill. That's about the high end up here.
i'm north of atlanta - IF you could wait in line long enough and IF there was any gas left by the time you get to the pump, then you could pay 4.98 per gallon for low-grade (all they had left)... and they'd only let you buy $20 worth.
$3.40/gallon is bad but this price gouging in Atlanta is setting a very ominous precedent for the future of unleaded pump prices.
As I post this Light Crude Oil for October is quoting @$68.62, down -0.32
We are not worried about the price of gas here in Gastonia, we don't have any.
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