• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Gasoline Supplies Tighten, Prices Rise

Posted on: Thursday, 1 September 2005, 12:00 CDT

Gasoline supplies tightened Thursday in markets that depend on shipments from Gulf Coast refiners and pipelines, and motorists increasingly faced pump prices well in excess of $3 a gallon.

Industry officials said a small-but-growing number of independent gasoline retailers in the Southeast and Midwest may simply turn off their pumps in the days ahead, either because of shortages or because wholesale prices climbed so high so quickly that they cannot compete without selling fuel at a loss.

"This will get worse before it gets better," said analyst Tom Kloza of Wall, N.J.-based Oil Price Information Service. He added: "A retailer has to decide 'Should I keep selling gas and keep losing $4,000 a day, or should I just bag my pumps until things get quieter?'"

Gasoline futures surged for the fourth day in a row on the New York Mercantile Exchange, sending prices 25 percent higher in less than a week. Unleaded gasoline for October delivery traded at $2.42 per gallon, an increase of more than 16 cents.

Oil prices fell for the second day in a row, with traders much less concerned about the shutdown of petroleum platforms in the Gulf of Mexico than they are with the closure of refineries and pipelines. Nymex crude futures fell 39 cents to $68.55 a barrel.

So far, the Bush administration has not loaned any oil from the U.S. Strategic Petroleum Reserve and analysts said its decision to relax environmental restrictions on the type of gasoline sold during summer would have a marginal impact on supply.

Also lifting gasoline futures was word that wholesale gasoline suppliers in the U.S. have been limiting the amount of fuel they sell to retailers in certain markets to make sure retailers do not take delivery of more than they need.

While gasoline shortages have been reported in a few markets, analysts do not believe the problem is yet widespread. There have been reports of gas stations running out in Atlanta, as well as in parts of North Carolina, West Virginia, Wisconsin and Arizona.

"Prices are fluctuating wildly at the wholesale level and in some cases it's not a question of what the marketer is going to pay, but rather they are concerned about whether they can get gasoline and diesel at all," said Greg Scott, a lawyer representing the Society of Independent Gasoline Marketers of America.

Scott described the supply situation in much of the East Coast as "dire" and that it could get worse. "We have to ask consumers to exercise restraint because a run on the bank is going to lead to more problems," he said.

With gas stocks tight even before Katrina struck, the storm's impact was not restricted to the United States.

"The pressure is on retail prices everywhere to rise, fueling flames of discontent," said Vienna's PVM Oil Associates in its daily energy market report. It said some unions in Nigeria - which imports gas and other refined products despite being a net exporter of crude - were threatening to strike in protest against a 30 percent rise in pump prices.

Only one of the eight refineries now shut down has spelled out plans to restart: Valero Energy Corp., which estimated it will take two weeks for its 260,000 barrels-a-day St. Charles facility to recommence production. The status of the majority of plants is unclear, with several being located in areas of severe flooding.

"Depending on what we learn in the next few days this may be the biggest oil-supply shock since the 1970s. We are now in the days of reckoning," said Cambridge Energy Research's Daniel Yergin.

Even before Katrina, oil producers and refiners had been struggling to meet rising demand around the globe, particularly in the U.S. and China. Energy markets have been on edge because the amount of excess oil production capacity worldwide is only about 1.5 million barrels a day, or less than 2 percent of demand.

Crude reached a record intraday high of $70.85 a barrel Aug. 30. Prices are more than 50 percent higher than a year ago but would need to reach $90 to surpass the inflation-adjusted high set in 1980.

Katrina slammed through zones in the Gulf of Mexico crucial to U.S. petroleum infrastructure Mexico over the weekend, causing widespread damage. The storm killed hundreds and has left most of the city of New Orleans under water.

Damage assessments from major oil companies remain sketchy. The U.S. Coast Guard also said several offshore rigs were missing.

The U.S. Minerals Management Service said Wednesday that 91 percent of the Gulf of Mexico's oil output was out of service, with more than 6 million barrels of production lost since Friday. The agency said 83 percent of natural gas output was shut down, resulting in a loss of 34.2 billion cubic feet of lost production since Friday.

Natural gas prices fell marginally to $11.451 per 1,000 cubic feet. But heating oil rose more than 6 cents to $2.1373 a gallon, reflecting fears that shortfalls would last into the start of the Northern Hemisphere winter.

---

Associated Press Writers George Jahn in Vienna, Austria and En-Lai Yeoh and Gillian Wong in Singapore contributed to this report.

Source: Associated Press/AP Online

More News in this Category