Gas prices spike overnight as Ike slams coast

By: AP
By: AP

HOUSTON (AP) -- Gas prices jumped Saturday as Hurricane Ike pounded the refinery richregions of Texas and Louisiana, threatening to shut down the nation's vast energy complex in the Gulf of Mexico for days.

Gas prices nationwide rose nearly 6 cents a gallon to $3.733, according to auto club AAA, the Oil Price Information Service and Wright Express.

The cost for a gallon of gas could head back toward all-time highs of $4-per-gallon, reached over the summer when oil prices neared $150 a barrel.

Geoff Sundstrom, AAA's fuel price analyst in Orlando, Fla., said Ike has disrupted supply at the wholesale level in the Gulf Coast, where prices struck $4.85 a gallon Friday.

Refineries may remain shut-in for days, even if there was no serious wind damage or flooding.

"The reality is, we're facing a temporary shortage in wholesale gasoline," he said.

Ike ravaged southeast Texas early Saturday, battering the coast with driving rain and high wind. Thousands of homes and government buildings are flooded, roads are washed out, and power outages were approaching 2 million customers from Houston into Louisiana.

Ike was about twice the size of Hurricane Gustav, which rammed into the Louisiana shore two weeks ago.

The storm surge was less severe than what had been predicted. Wilson Shaffer, chief of the National Weather Service's evaluation division, said Saturday morning that the highest surge so far was seen at Sabine Pass in Texas, at about 13.5 feet, according to tidal gauges.

Forecasters had predicted a surge of up to 25 feet, which would have been the highest in recorded history in Texas, above 1961's Hurricane Carla, a storm that brought a 22-foot wall of water, with some 15 feet rushing inland up shipping channels.

The Sabine Pipe Line, a crucial natural gas conduit, has been shut down, according to the CME Group, parent of the New York Mercantile Exchange.

The CME made a finding of force Majeure for all remaining delivery obligations for September natural gas contracts.

Refineries along the upper Texas Gulf Coast account for about one-fifth of the nation's refining capacity. Exxon Mobil's refinery in Baytown, outside Houston, is the nation's largest.

Valero's refineries at Houston, Texas City and Port Arthur remain shut down, and all three have lost power.

The company said it was unable to provide a damage assessment.

Valero's other Gulf Coast refineries remain in operation at planned rates.

Retail prices for gas may not reach as high as wholesale, with anti-gouging laws in some stakes kicking into effect, Sundstrom said.

In other instances, gas stations have long-term price contracts with oil companies. There could be instances where gas stations on the same street have big disparities in price because of the price they paid for fuel, he said.

"You may find stations that are out of gasoline, not because it's available, but because they don't want to pay the price," he said.

At a Sunoco station in Arlington, Va., Friday night, gas was selling for $3.55 a gallon while a BP station a block away had gas for $3.75 a gallon.

Sundstrom said the increase in prices may be for just a short time. Prices also spiked after hurricanes Katrina and Rita in 2005.

Ben Brockwell, director of data, pricing and information services for the Oil Price Information Service in Wall, N.J., said prices could climb sharply in the Gulf Coast region - 50 cents a gallon perhaps - if wholesale prices remain at inflated levels for a sustained period.

"That question still needs to be resolved," he said. "This is panic-buying in advance of a storm that we don't know what's going to do."

With the storm still pounding southeast Texas, oil refiners were expected to get an idea of any damage they may have sustained later Saturday.

Thirteen Texas refineries had been shut down due to Ike, according to the Department of Energy. In Louisiana, refineries were just coming back online after Hurricane Gustav.

Centerpoint, the main utility in Houston, reported 1.3 million outages Saturday. Entergy Texas said nearly all of its 395,000 customers in southeast Texas were without power. Both warned that it could be weeks before power is restored.

Royal Dutch Shell said it would fly over its facilities in the Gulf Saturday or Sunday to assess damage, particularly at its 39,000-ton Auger platform because of its proximity to Ike. The Auger platform is 3,280 feet above the sea floor, and is one of five such platforms for Shell in the deep Gulf waters.

Auger was designed to simultaneously withstand hurricane force waves of 71 feet and winds of 140 mph.

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Mark Williams reported from Bryan, Texas. Associated Press writer Brian Skoloff in West Palm Beach, Fla., contributed to this report.

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