September 9, 2008

Gas Prices in R.I. Continue to Decrease

Gasoline prices in Rhode Island slipped another three cents as of yesterday, but the potential effect of the approaching Hurricane Ike on U.S. production in the Gulf of Mexico has yet to be felt at the local pumps.

The average price of regular yesterday was $3.57 a gallon, down three cents from a week ago after inching down a penny in the prior week, according to a survey yesterday by the state Energy Office. The report said prices ranged from a low of $3.50 a gallon to a high of $3.64 a gallon.

A separate survey by AAA Southern New England set the average price at $3.56 a gallon, down four cents from the prior week.

Rhode Island is currently 10 cents below the national average of $3.65 a gallon. A year ago at this time, the average price of regular in Rhode Island was $2.68 a gallon.

The state Energy Office survey set the average price of diesel at $4.45 a gallon this week and the average retail price of home heating oil at $3.69 a gallon.

Gasoline prices have slipped after Hurricane Gustav blew through the Gulf without causing major damage and refiners, which had closed their oil platforms, began to resume production.

But Ike may enter the Gulf this week.

Andy Lipow, president of Houston-based Lipow Oil Associates LLC, said, "As for the next storm, the main one that's of concern is Ike, and it's unclear what its impact will be on oil infrastructure."

Wholesale gasoline along the Gulf Coast jumped 12 percent yesterday, the biggest increase in almost three years, as the storm approached the region responsible for 48 percent of U.S. refining capacity.

Gasoline for sale at Gulf Coast terminals rose 25.39 cents to $3.30 a gallon at 2:41 p.m., according to data compiled by Bloomberg News. It was the largest one-day increase since Sept. 27, 2005, when Hurricane Rita slammed into coastal refineries, triggering an 18- percent surge in the price for the fuel.

About 60 percent of Gulf Coast refining capacity remained shut or operating at reduced rates yesterday, one week after Gustav hit Louisiana, knocking down power lines and crippling crude-oil delivery routes, the U.S. Energy Department said.

Gasoline rose because of lingering closures associated with Gustav "and now the potential that Ike is going to shut down refiners," said Lipow.

Four oil-processing plants were idle as of 10 a.m. and 14 were in the process of restarting output or operating at below-normal rates, the department said.

Ike is expected to reach the coast of Texas or Louisiana in about five days.

Evacuations of oil and natural-gas facilities in the Gulf will be done within two days, before Ike arrives, ERA Helicopters LLC said.

"Most are evacuating nonessentials today and tomorrow and essentials Wednesday," said Jim Shugart, an executive vice president at ERA Helicopters. "It's been a yo-yo affair. The larger companies hadn't fully restocked yet since Gustav and they're battening down the hatches and doing it again."

Shugart said Anadarko Petroleum Corp., Energy Partners LP, Hess Corp., Energy Resource Technology Inc. and Total SA have begun evacuations. BP PLC, Rowan Cos. and Diamond Offshore Drilling Inc. were also evacuating workers.

The Gulf is home to more than one-fourth of U.S. oil output and about 14 percent of U.S. natural-gas production.

Oil prices actually slipped yesterday as Ike weakened over Cuba. The storm, after scouring the Bahamas and Haiti, made landfall on Cuba as a Category 3, but then lost speed and became a Category 2.

"The main driver today and through the rest of this week will be Hurricane Ike. The market is going to zig and zag in response to each development," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates.

Meanwhile, the Organization of Petroleum Exporting Countries' upcoming meeting in Vienna, Austria, continued to weigh on traders' minds. OPEC oil ministers will be deciding whether to trim production in a bid to stall oil's recent slide. Iranian oil minister Gholam Hossein Nozari said he thinks there is too much crude on the market, but some analysts say they believe Saudi Arabia will try to thwart calls to cut production.

Minister of Energy Mohammed Bin Dhaen al-Hamli, who will lead the United Arab Emirates delegation, said that inventory levels indicate that "the market is well supplied," and that "the recent decline in prices simply shows that the oil price had risen too high and too fast."

Originally published by Journal staff and wire reports.

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