Storm Fallout

By Brian L. Milne, Refined Fuels Editor for DTN

Gasoline prices at retail outlets soared late last week and into the weekend in a number of states across the country as the twin effects of hurricanes Gustav and Ike were felt along the supply chain that reached local markets far away from the Gulf Coast, as oil refineries in Texas and Louisiana shut in preparation for the storms.

Damage at refineries by both hurricanes was minimal if at all, but the shutdowns and their delayed restart due primarily by lost power has reduced gasoline supply for a number of markets.

Refineries in Louisiana shut ahead of Hurricane Gustav have all restarted, but the roughly week or more loss in production drained inventory levels just as refineries in southwest Louisiana near St. Charles and in Texas were forced to close operations ahead of Hurricane Ike. At last count, there remain 13 oil refineries in Texas, primarily near Houston and Port Arthur that remain out of service due to lost power.

The lost supply by the two hurricanes triggered 11 states to request fuel waivers for gasoline from the Environmental Protection Agency (EPA), with the waivers easing environmental regulations linked to specific fuel types sold there.

States granting waivers include Alabama, Florida, Georgia, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, Texas, Ohio, and Virginia. The goal of the waivers are to relieve stress in the supply chain by offering flexibility in what fuel can be sold in affected areas of the country.

View DTN’s Weekly and Historical Gas Prices

In the wholesale market, regular grade conventional gasoline in the Gulf Coast briefly topped $5 gallon late last week, as short supplies triggered aggressive buying. The price spike reverberated through the supply chain, impacting markets in New York and Chicago, and less so in Los Angeles.

It will take some time for retail gasoline prices to peel back from their recent highs, and the decline will be choppy across the country, with consumers in the Gulf Coast region likely to be slower in seeing price relief.

About the Author
Brian L. Milne is the Refined Fuels Editor for DTN—a leading business-to-business provider of real-time commodity information services. Milne has been focused on the energy industry for nearly 14 years as an analyst, journalist and editor. He can be reached at brian.milne@dtn.com.

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