“It’s pure panic.”
That’s the way one oil industry expert describes what’s happening in trading of gasoline at the wholesale level in anticipation of Hurricane Ike hitting the Texas Coast.
The Oil Price Information Service issued a news alert midday Thursday, Sept. 11, reporting that Gulf Coast trading started off “absolutely frantic” in the morning with spot deals at $4.25 per gallon and skyrocketed to trades in the $5-per-gallon neighborhood by midday.
Valero has already raised prices at the pump by 50-cents a gallon at some locations.
“The days and weeks ahead are guaranteed to be extremely volatile as Hurricane Ike wreaks havoc on an already fragile U.S. fuel market. Expect to see a myriad of supply issues, and wild swings in spot and rack prices,” the news alert noted.
Prices in the Midwestern markets, Chicago and New York, for example, have not hit the same panic levels as the trades in the Gulf Coast region, according to the alert.
The OPIS memo advised that the panic that has gripped gasoline has “yet to fully filter into the diesel market.” Click here for diesel prices in your area.
According to The Associated Press, Texas is home to 26 refineries that account for one-fourth of U.S. refining capacity, and most are clustered along the Gulf Coast.
Although oil rigs are designed to stand high winds, it’s the threat of flooding in the areas with refineries or of extended power outages that tends to push fuel costs higher.
Ironically, even though gasoline prices are spiking on the threat of Ike’s landfall, oil prices remained low in trading.
Anticipation of a slowing global economy and the strengthening of the U.S. dollar provided the damper needed to prevent oil futures from shooting up.
Light, sweet crude for October delivery fell $1.88 to $100.70 a barrel on the Nymex, after dropping as low as $100.10 a barrel. The contract settled Wednesday at $102.58 – the lowest close since April 1. The last time this year oil traded for below $100 a barrel was April 2.
Staff Writer Reed Black contributed to this report.