NEW YORK - Gasoline prices jumped to unprecedented levels in the wholesale markets Thursday as Hurricane Ike tore across the Gulf of Mexico, threatening to strike Texas and its refineries.
The wholesale price of gasoline ranged from $4 to nearly $5 a gallon at the U.S. Gulf Coast on Thursday, said Tom Kloza, publisher and chief oil analyst of the Oil Price Information Service in Wall, N.J. That is up significantly from about $3 to $3.30 a gallon on Wednesday, Kloza said.
"We're looking at the highest wholesale prices ever for a huge swath of the country," he said. "People understand that regardless what happens with Ike, it's going to shut down the biggest refining cluster for a period of five, six, seven days."
The wholesale price of gasoline is what refineries charge retailers. Retailers then mark up those prices for the customer so they can make a profit — so if these wholesale prices hold, it could mean that pump prices for U.S. drivers easily break through the July 17 record of $4.114 a gallon.
The average U.S. retail price for gasoline was at $3.671 on Thursday, according to the Oil Price Information Service, auto club AAA and Wright Express.
The market's renewed storm worries arrive a day after the U.S. Energy Department reported a larger-than-expected drop in crude and gasoline inventories, and OPEC decided to cut excess production by about half a million barrels a day.
October gasoline futures on the New York Mercantile Exchange rose 11.74 cents to $2.779 a gallon in morning trading.
But despite the growing worries about Ike, funds continued to liquidate their investments in crude, anticipating a slower global economy and a stronger U.S. dollar.
Light, sweet crude for October delivery fell $1.62 cents to $100.96 a barrel on the New York Mercantile Exchange, after dropping as low as $100.85 a barrel in electronic trading. The contract fell 68 cents on Wednesday to settle at $102.58 — the lowest close since April 1.
"It's a strange, strange world here," Kloza said. "You might see an extraordinary thing — you may see crude oil less than $100 and retail gasoline more than $4 a gallon."
Ike, arriving on the heels of last week's Hurricane Gustav, was expected to blow ashore early Saturday somewhere between Corpus Christi and Houston, with some forecasts saying it could become a Category 4 storm.
On Thursday, Ike was a Category 2 storm with winds near 100 mph (161 kph). It was churning about 645 miles (1,038 kilometers) east of Brownsville, Texas, and moving west-northwest at near 9 mph (14.5 kph), after tearing through Cuba and killing at least 80 people in the Caribbean.
Texas is home to 26 refineries that account for one-fourth of U.S. refining capacity, and most are clustered along the Gulf Coast in such places as Houston, Port Arthur and Corpus Christi. Exxon Mobil Corp.'s plant in Baytown, outside Houston, is the nation's largest refinery.
Refineries are built to withstand high winds, but flooding can disrupt operations and — as happened in Louisiana after Gustav — power outages can shut down equipment for days or weeks.
A decision Wednesday by the Organization of Petroleum Exporting Countries to reduce output by 520,000 barrels a day failed to boost oil prices, which have fallen 30 percent since reaching a record $147.27 on July 11 on concerns slowing global economic growth will undermine demand for crude.
"OPEC was trying to slow this steep decline," said Mark Pervan, senior commodity strategist with ANZ Bank in Melbourne. "But we're in a bearish trend right now and I still expect the price to fall another $10."
Trader and analyst Stephen Schork suggested prices could fall even lower, to $75, "which is exactly where oil was last September."
Evidence of falling U.S. crude inventories — which normally push prices higher — also failed to stop Thursday's decline. The Energy Department's Energy Information Administration said Wednesday that crude inventories fell by 5.9 million barrels last week compared to the previous week, and that gasoline inventories fell by 6.5 million barrels. The EIA also reported, however, that inventories of distillates — which include heating oil and diesel fuel — fell by a lower-than-anticipated 1.2 million barrels.
In other Nymex trading, heating oil futures rose 3.55 cents to $2.9379 a gallon, while natural gas for October delivery rose 14.8 cents to $7.541 per 1,000 cubic feet.
In London, October Brent crude rose 8 cents at $99.05 a barrel on the ICE Futures exchange.