Wednesday, August 29, 2012

Gas prices continue to climb on Isaac fears


Gas prices continue to climb on Isaac fears

@CNNMoneyAugust 28, 2012: 1:26 PM ET
Gas prices are rising -- especially along the Gulf Coast. Click on photo for prices in your state.
NEW YORK (CNNMoney) -- Gas prices continued to climb -- particularly along the Gulf Coast -- as the approach of Hurricane Isaac forced the closure of many oil and refining facilities.
A survey for the motorist group AAA showed that the national price for a gallon of regular gas crept up 0.6 cent to $3.756 on Tuesday.
But sharper rises were recorded in the Gulf states preparing for the storm, with gas jumping 2.5 cents to $3.642 a gallon in Louisiana, a little more than 2 cents to $3.563 in Mississippi, and 1.3 cents to $3.581 in Alabama.
Tom Kloza, chief oil analyst for the Oil Price Information Service, which tracks gas prices for AAA, estimated that the national average could shoot up by 10 cents due to the disruption to supplies from Isaac, although he expects a fairly quick retreat if there is no lasting damage from the storm.
Related: Gas prices by state
Even before the storm, prices had risen about 7% this month, to the highest levels since early May. But the storm has added to the climb, taking the national average up 2.6 cents since Friday, when Isaac's path first appeared to veer away from Florida toward the oil and gas facilities in the Gulf of Mexico.
More than 1.3 million barrels of daily gasoline refining capacity in the region was shut down Monday ahead of the storm, which is expected to be upgraded to hurricane status later Tuesday. Phillips 66 (PSX), Valero (VLO, Fortune 500), Marathon (MRO, Fortune 500) and Exxon Mobil (XOM, Fortune 500) were among those shutting down refineries as a precaution. Motiva Enterprises, a joint venture between Royal Dutch Shell (RDSA) and Saudi Arabian Oil that operates four refineries along the Gulf Coast, was running those facilities at reduced rates in preparation for the storm and has also shutdown a pipeline in the area.
The National Hurricane Center declared Isaac a hurricane Tuesday. It is expected to reach the Gulf Coast sometime late Tuesday or early Wednesday. A hurricane warning was in effect for areas east of Morgan City, La., to the Mississippi-Alabama border. The region includes metropolitan New Orleans and much of the nation's refining capacity.
The refineries were the only oil facilities shut down in advance of the storm. The federal Bureau of Safety and Environmental Enforcement reported Monday that more than half the rigs and platforms in the Gulf of Mexico had evacuated their crews. That, in effect, shut down nearly 80% of oil production in the Gulf and nearly half the natural gas output.
Oil futures rose 75 cents $96.22 in trading Tuesday.
Gasoline futures -- the wholesale price paid by companies that use or resell gasoline -- fell, after being up as much as 2 cents a gallon earlier in the day. The September contract dropped 5.7 cents to $3.098 a gallon, while the October contract slipped 4.4 cents to $2.906 a gallon. To top of page

Isaac leads to 5-cent gas price spike


Isaac leads to 5-cent gas price spike

@CNNMoneyAugust 29, 2012: 8:27 AM ET
Gas prices spiked 4.8 cents a gallon nationwide as Hurricane Isaac cut output from Gulf Coast refineries. Click on photo for gas prices in your state.
NEW YORK (CNNMoney) -- Gas prices shot up by nearly 5 cents a gallon nationwide Wednesday -- with one-day surges of as much as 14 cents in some states -- after Hurricane Isaac cut output from refineries along the Gulf Coast.
But experts say the price spike is likely to be short lived, especially since the winds associated with the Category 1 storm are not believed to have caused lasting damage to the refineries in the region.
Wholesale gas prices were already falling Tuesday ahead of the storm making land, and were sharply lower Wednesday.
Hurricane Isaac made landfall late Tuesday and early Wednesday near Port Fourchon, La., about 60 miles southeast of New Orleans. The region's Gulf Coast is a key center of the nation's oil refining capacity.
Motorist group AAA reported that the price of a gallon of regular gas shot up 4.8 cents to $3.804 in the latest reading released Wednesday. It is the highest level since early May and the biggest one-day spike in prices since February 2011, when fighting in Libya raised concerns about oil supplies.
Gas spike spreads to other states
The Gulf states, which were hit by big gas prices spikes in Tuesday's reading, continued to see their prices rise Wednesday -- up 5.1 cents in Louisiana, 3.9 cents in Mississippi and 4.1 cents in Alabama.
But every state in the country was paying a higher average price Wednesday as compared to Tuesday. And some of the states in the South and Midwest that get oil or gas from pipelines in the Gulf region suffered significantly larger spikes. The biggest increase was a 13.9 cent jump in Ohio, followed by a 13.2 cent rise in Indiana and a 12 cent rise in Michigan.
Other states suffering large spikes included an 8.1 cent rise in Kentucky, and increases of more than 7 cents in Georgia, South Carolina, Missouri and Arkansas.
Read CNN's coverage of Hurricane Isaac
According to the federal Energy Information Administration, the storm forced the closing of five refineries operated by Exxon Mobil (XOM, Fortune 500), Valero (VLO, Fortune 500), Royal Dutch Shell (RDSA) and Phillips 66 (PSX). Between them, the refineries can process about 937,000 barrels of oil a day.
The storm also cut production at another three huge refineries operated by Exxon Mobil, Shell and Marathon Oil (MRO, Fortune 500), which have a combined output of 1.23 million barrels.
Between them, the eight affected refineries account for about one-eighth of the nation's refining capacity.
Gas spike to be short-lived
September and October wholesale gasoline futures both fell about 4 cents in trading Wednesday, the second straight day of declines after a spike higher Monday.
Tom Kloza, chief oil analyst at the Oil Price Information Service, which tracks pump prices for AAA, said Tuesday that retail gas prices will likely continue to rise over the next few days, But they then should retreat fairly quickly, both as refining capacity and pipelines shut by the storm come back on line.
The end of the summer driving season, which means refiners will no longer required to produce the more expensive summer blends of gasoline, will also provide relief at the pump.
Isaac also forced the evacuation of more than 550 oil platforms and rigs off of the Gulf Coast, cutting off 93% of the Gulf of Mexico's oil production and two-thirds of its natural gas output, according to the federal Bureau of Safety and Environmental Enforcement.
But oil prices were down 72 cents in Wednesday trading to $95.61 a barrel. The drop was attributed to the fact that winds from the storm were not strong enough to raise it to Category 2 or higher, and because White House spokesman Jay Carney said a release of oil from the nation's Strategic Petroleum Reserve remains an option.
Wednesday is the seventh anniversary of Hurricane Katrina hitting New Orleans. That Category 4 hurricane, which killed about 1,800 people, caused the average price of regular gas to quickly spike to what was then a record high. While it took about two months for gas prices to retreat after that storm, the higher winds and human toll caused a much longer disruption to the region's refining industry.
To top of page
-- CNNMoney's Ben Rooney contributed to this story.

Hurricane Central News


Hurricane Central News

Isaac: Major Flood Threat, Midwest Drough...


Isaac: Major Flood Threat, Midwest Drought Relief
Isaac poses a major flood danger for the Lower Mississippi Valley. How far will Isaac's rain spread inland?
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Isaac Brings Higher Gas Prices


Isaac Brings Higher Gas Prices

Jonathan FaheyUpdated: Aug 29, 2012, 7:05 PM EDTAssociated Press
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Will Isaac Drive Gas Prices Higher?

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NEW YORK -- Drivers are being hit with the biggest one-day jump in gasoline prices in 18 months just as the last heavy driving weekend of the summer approaches.
As Tropical Storm Isaac swamps the nation's oil and gas hub along the Gulf Coast, it's delivering sharply higher pump prices to storm-battered residents of Louisiana and Mississippi - and also to unsuspecting drivers up north in Illinois, Indiana and Ohio.
The national average price of a gallon of gas jumped almost five cents Wednesday to $3.80, the highest ever for this date. Prices are expected to continue to climb through Labor Day weekend, the end of the summer driving season.
"The national average will keep ticking higher, and it's going to be noticeable," says Patrick DeHaan, senior petroleum analyst at Gasbuddy.com
AP Photo/Tony Dejak
A man fills his gas tank at a gas station Wednesday, Aug. 29, 2012, in South Euclid, Ohio. Drivers are facing the biggest one-day jump in gasoline prices in 18 months as Hurricane Isaac swamps the nation’s oil and gas hub along the Gulf Coast.
The wide storm shut down several refineries along the Gulf Coast and others are operating at reduced rates. In all, about 1.3 million barrels per day of refining capacity is affected. So, it's no surprise that drivers in Louisiana, Alabama, Mississippi and Florida saw gas prices rise by a dime or more in the past week.
But some states in the Midwest are suffering even more dramatic spikes. Ohio prices jumped 14 cents, Indiana prices soared 13 cents and Illinois prices jumped 10 cents on Wednesday alone according to the Oil Price Information Service. Days before Isaac is expected to douse those states with rain, the storm forced the shutdown of a pipeline that serves a number of Midwest refineries.
Drivers in the region were angry and confused. ""I saw gas in my neighborhood for $3.56 a gallon just Tuesday morning, and now I'm paying $3.95. It's terrible," said Mary Allen of Cincinnati as she paid $20 for just over five gallons of gas. She wondered how Isaac could drive up gas prices in Ohio - and then resigned herself to a holiday weekend without travel.
(MORE: Isaac's Slow and Soaking Trek to the Midwest)
The price surge is happening at the wrong time and the wrong place for Dickson Stewart, a 56-year-old electronics consultant, who is driving from Minneapolis to Savannah, Ga. this week. He stopped at a BP station in downtown Chicago Tuesday - home to some of the highest retail prices in the country - and paid $4.49 a gallon to fill up his Jeep Wrangler.
AP Photo/Kalamazoo Gazette, Mark Bugnaski
A man pumps gas into his van while a sign advertises that a gallon of regular unleaded costs $4.09 at the Speedway on South Westnedge Avenue in Kalamazoo, Mich.
Stewart expects gas prices to fall after Labor Day. Analysts say he's probably right.
As Isaac fades away, the summer driving season ends, and refiners switch to cheaper winter blends of gasoline, stations owners should start dropping prices. "There is some very good relief in sight," DeHaan says.
When Katrina hit in 2005, the national average for gas spiked 40 cents in six days and topped $3 per gallon for the first time. Isaac likely won't have the same result, though its full impact on the refineries is yet to be determined.
The refineries are not expected to suffer long term damage. But refiners decided to shut down or run at reduced rates to protect their operations.
These facilities consume enormous amounts of electric power and generate steam to cook crude oil into gasoline, diesel, jet fuel and heating oil. If a refinery loses power suddenly, operators can't properly clear the partially cooked oil out of pipes, and re-starting the refinery can take several days or even weeks.
In advance of Isaac, refineries instead conducted what is known as an orderly shutdown, so they can re-start as soon as the power supply is assured again. The Gulf refineries will likely stay off line for about three days.
AP Photo/Danny Johnston
Early morning sunlight illuminates fuel storage tanks at a North Little Rock, Ark., petroleum distributorship.
Isaac cut into the amount of gasoline being produced, and raised fears that supplies could fall dangerously low if the storm proved worse than expected. When supplies drop or are threatened, wholesale prices rise. Then distributors and station owners have to pay more to fill up their station's tanks. They then raise their prices based on how much they paid for their current inventory, how much they think they will have to pay for their next shipment, and, how much their competitors are charging.
Prices spiked particularly high in the Midwest because Isaac forced Shell to close a pipeline that delivers crude from St. James, La. to refineries in the region.
Gasoline prices are particularly vulnerable to spikes around this time of year. Refiners keep a low supply of more expensive blends as driving season ends, knowing they'll soon be able to make cheaper winter blends of gasoline.
"We are really working with a just-in-time delivery system," said Tom Kloza, chief oil analyst at the Oil Price Information Service.
Pump prices were on the rise even before Isaac blew in. The average price for gas rose about 40 cents from July 1 to mid-August because of higher oil prices and refinery problems in the Midwest and West Coast. At $3.80 per gallon, the national average is the highest since May 1 and well above the previous record for Aug. 29, $3.67 in 2008.
Wednesday's jump of a nickel was the 10th biggest one-day jump on record, according to OPIS, and the biggest since the average price rose 6 cents on February 15, 2011 when turmoil in Libya was rising.
But prices could quickly come down if refineries can soon get up and running. Crude oil prices fell Wednesday and wholesale gasoline prices fell the past two days, suggesting the spike in retail gasoline prices could be short-lived. Americans will soon do less driving and the switch to cheaper blends will be well underway by mid-September.
That's still too late for Sharon Simon of Gadsden, Ala. She's driving 900 miles north to her daughter's wedding in Olean, N.Y. this weekend, and will now have to spend an extra $30 to $50 on gasoline for the trip. "Just as we are getting ready to head out the prices go up," she said. "I'm fed up with the surge in price every time there is a holiday."