Gas Prices Spike in 'Panic' as Ike Bears Down on Texas

The wholesale price for gasoline produced on the Gulf Coast jumped about 30 percent on the spot market Thursday as Hurricane Ike churned toward Texas and its massive petroleum refining infrastructure.

The wholesale price for a gallon of gasoline rose about $1 to $4.25 Thursday morning, topping the high price five years ago when hurricanes Katrina and Rita raked the Gulf Coast, said Tom Kloza, publisher of the Oil Price Information Service in Wall, N.J.

"It's pure panic," Kloza said. "It's related to the fact that there are worries about whether there's going to be enough (gasoline) in the distribution system to satisfy some of the September pumping needs on the Gulf Coast."

The spike will almost certainly lead to high pump prices for consumers, as the gasoline makes it way from the wholesale market to retailers.

Up to now, neither Ike nor Hurricane Gustav, which struck Louisiana earlier this month, has caused a significant increase in gasoline prices.

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The average national retail price of a gallon of regular unleaded gasoline was at $3.671 on Thursday, up a couple of cents in the past two days, according to auto club AAA, the Oil Price Information Service and Wright Express.

That all changed on the wholesale market Thursday, Kloza said, largely from concerns about the potential damage Ike may cause to refineries along the Texas coast. Texas is home to 26 refineries that account for one-fourth of U.S. refining capacity, and most are clustered along the Gulf Coast in places such as Houston, Port Arthur and Corpus Christi. Exxon Mobil Corp.'s plant in Baytown, outside Houston, is the nation's largest refinery.

"This is about refineries in the target of the storm," Kloza said. "This is about refineries having to shut down for probably five, six, seven days even if the storm misses them."

Kloza noted there's no guarantee wholesale prices will remain at the levels of Thursday morning, not even for the day.

"This is going to be a day where the differences in the market are going to be measured by quarters and fifty-cent pieces as opposed to pennies," he said. "It could be $5 a gallon at the end of the day or it could be $3 a gallon."

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