The wholesale price of gasoline is spiking and almost certainly will blow by the previous high prices set after Hurricane Katrina interrupted oil drilling in the Gulf of Mexico.
Hurricane Ike comes when U.S. gasoline supplies are sitting at the
lowest level in nearly eight years, so any interruption in production will show up at the pump quickly. There is no cushion.
At 3:05 p.m. EDT, lines are reported to be forming at Florida gas stations where prices have skyrocketed to more than $5 a gallon.
WTSP, TampaBay's 10 reported:
Regular unleaded gasoline is selling for $5.49 a gallon in Tallahassee and lines are forming at stations still selling cheaper gas, matching reports elsewhere in the state.
It's the anticipated spike in prices in response to Hurricane Ike and the possible hit refineries and production could take in the Gulf.
Prices on the wholesale spot market have jumped $1.50 a gallon. The price rises are not necessarily gouging if retailers are passing along increased wholesale costs.
As the price increases move down the chain, there are three options:
Gas companies try to absorb some of the cost, which is not likely since they have faced many price increases recently.
Gas companies refuse to sell such expensive gasoline and shut down pumps.
Retailers pass the cost along to you.
A fourth option might be a release of some of the national strategic oil reserve.
Reuters says the wholesale price of gasoline could go higher:
Wholesale gasoline prices in the U.S. Gulf topped $5 a gallon on Thursday as the region's oil refineries began closing down ahead of Hurricane Ike, adding to fears that U.S. drivers could see pump prices rise again.
Prompt spot gasoline prices in the U.S. Gulf traded at a record $2.50 a gallon over their gasoline futures benchmark, which itself traded as high as $2.83 a gallon in active trade on the NYMEX exchange, putting the price tag on a wholesale gallon of gasoline as high as $5.32 per gallon.
"The worst-case scenario for the hurricane season is what we're looking at with Ike," said Chris Jarvis, senior analyst with Caprock Risk Management.
CNN Money reported:
As the storm churned toward the Texas coast, wholesale gas prices were up more than $1.50. On Wednesday, a gallon of gas cost $3.25 on the Gulf Coast wholesale market, and by Thursday afternoon, wholesale gas cost more than $4.75 a gallon, according to Tom Kloza, the chief oil analyst for Oil Price Information Service, an independent publisher that follows wholesale and retail fuel prices in North America.
The Gulf Coast wholesale market is the largest bulk market for wholesale gasoline in the world, according to Kloza.
"They are absolutely going ballistic in the Gulf Coast," said Kloza, and the pricing is based on fear of Ike shuttering refineries.
BusinessWeek reported:
A "storm center" page on the Web site for ConocoPhillips (COP), the nation's second-largest refiner, reports that the company's Sweeny (Tex.) refinery is being shut down. Its Lake Charles (La.) plant is operating at reduced rates and its Seaway refined product pipeline is closed. Houston-area employees were told to leave work at noon on Sept. 11.
The country is entering the fourth month of hurricane season with tight supplies of oil and gasoline. At 298 million barrels, national crude-oil supplies are down 7 percent from this period last year, according to data released Sept. 10 by the [U.S. Energy Information Administration]. The U.S. Minerals Management Service reports that 1.25 million barrels per day of oil production -- 95 percent of the output on federal waters in the Gulf -- is still shut down due to precautionary steps taken by oil companies in advance of Hurricane Gustav last week.
If prices spike, as they appear ready to do, it will come just days before
the U.S. House of Representatives could vote on expanding oil drilling along virtually all coastlines. The timing could not be better for those who back drilling. They will no doubt argue that being less reliant on any one source of oil will stabilize prices, although production from new wells would be years away.
