By dugan 8-30-08
The first concern as Hurricane Gustav sweeps across Cuba and toward the Gulf Coast is life and limb. Afterward, though, already painful gasoline prices could hit $5.00 a gallon quickly. Unlike the hurricane, it’s a preventable event. The storm may well cut refining capacity along the Gulf, but if the U.S. had a decent supply of gasoline on hand, price spikes would also be muted. But refineries have cut back production to keep prices up even as gasoline consumption falls. So U.S. gasoline supplies now are lower than before Hurricane Katrina in 2005.
From the AP story linked above:
Jeff Rubin, chief economist at investment bank CIBC World Markets, said that record could be shattered if Gustav seriously disrupts offshore energy production.
In 2005, pump prices jumped from slightly more than $2 a gallon to above $3 after Katrina and Hurricane Rita destroyed more than 100 oil platforms and damaged several refineries.
"The price consequences could be even worse this time," Rubin said in a report, noting that oil and gasoline inventories are lower than when Katrina and Rita hit. "Any replays of the 2005 storm season could see gasoline prices soar to $5 per gallon."
Most people remember the gasoline price spike after Katrina, but not everyone realized back then that oil prices went up only 10% after the storm, while gas was up 50%. Despite strong suspicions that refineries were price-gouging at the wholesale level, Bush administration "investigations" found no wrongdoing. We probably can’t expect better after Gustav, but this time around we can at least expect Congressional committees to keep a sharper eye on the oil companies.
Here’s a telling line, from the review in Variety of the new documentary "Gashole," about how we got to $4.50 gasoline:
Some of the pic’s points register as obvious and infuriating at once; hardest-hitting are the passages that point to oil execs’ use of 9/11 and Hurricane Katrina to post record profits, and to their strategies, twice defended before Congress, of reducing domestic refinery capacity by way of pumping up revenue.
One more reason that U.S. refineries ought to be regulated, and required to produce enough gasoline to keep a stable 30-day supply in the U.S., the level of the early 1990s. These days, it’s down to 20-22 days’ supply. And Gustav will probably show us what such a short supply means at the pump, not just in New Orleans but everywhere.