Gasoline prices jumped at the wholesale level Friday as Hurricane Ike swept through Gulf of Mexico, prompting companies along the Texas coast to shut down refining and drilling operations.
Crude oil on the futures market, however, briefly sank below the psychologically important $100-a-barrel mark for the first time since April 2 – showing that investors believe a worsening global economy will continue to drive down demand for some time in the United States and elsewhere.
The fact that U.S. fuel demand is so weak right now might mean the recent surge in the wholesale price of gasoline – which rose to about $4.85 a gallon in the Gulf Coast market Friday (Sept. 12) – might not be passed along to consumers unless Ike’s impact is severe and long-lasting.
“Major oil companies are sensitive to raising prices in this environment,” said Ben Brockwell, director of data pricing and information services at the Oil Price Information Service.
Ike is forecast to land early Saturday as a Category 3 hurricane near Galveston, a barrier island about 50 miles southeast of Houston. The Houston region is home to about one-fifth of U.S. refining capacity, and the site of a major fuel and grain distribution channel.
Wholesale gasoline prices on the Gulf Coast moved further into uncharted territory Friday, as refineries anticipated that Ike would lead to at least a significant pause in their operations, and at worst damage to their facilities. On Thursday, the Gulf Coast wholesale price of gasoline last traded at around $4.75 a gallon, according to OPIS, up substantially from about $3.25 Wednesday and less than $3 Tuesday.
Wholesale prices were much lower in other regions such as Chicago, New York and Los Angeles, but even those areas saw prices rise.
“Hopefully it’s a temporary phenomenon, but we won’t know until next week,” Brockwell said.