Gas prices seen well over $3 on Katrina
NEW YORK (Reuters) - U.S. retail gasoline prices will probably vault well over $3.00 per gallon in most parts of the country as early as this weekend after Hurricane Katrina devastated the energy industry in the Gulf Coast, analysts said Wednesday.
The spike will be bad news for drivers already paying nominally the highest pump prices on record, and has led some analysts to predict a looming economic backlash.
"This in many ways is the worst-case scenario that the oil industry has been fearing," said Geoff Sundstrom, spokesman for the AAA motorist group.
"On a national average, we could hit $3.25 at the pump easily, potentially even by this weekend," said Jason Schenker, economist at Wachovia Corp. "This is going to cut into consumer demand."
Katrina slammed into the Gulf Coast on Monday, shutting nearly all of the Gulf of Mexico's oil production -- about a quarter of the nation's oil output -- and closing down nine refineries and several pipelines along the coast, according to government figures.
The virtual shutdown of the energy industry in the region has pushed wholesale gasoline prices roughly a dollar higher this week to over $3 a gallon on concerns that fuel supplies could run short.
The Gulf of Mexico is home to the majority of the nation's refineries and pipelines, meaning problems there will be felt across the country.
The spike has already put many U.S. gasoline retailers in the red by forcing them to buy at sharply higher rates, and the impact will shortly hit consumers.
"We're in hyperdrive," said Jeff Lenard, spokesman for the National Association of Convenience Stores, which accounts for about three-quarters of the U.S. gasoline sold. "These wholesale increases are going to be felt almost immediately."
He added, "Right now we're losing money on every sale as we slowly pass on these increases, and in the meantime we're being called all kinds of names."
Gasoline futures on the New York Mercantile Exchange spiked above $2.90 a gallon on Wednesday, up a dollar from last Friday's settlement. Cash prices in the Gulf Coast and Midwest have shot up even further.
"My rule of thumb is that the national average pump price will typically be 65 cents higher than the NYMEX price," said Mark Routt of Boston-based Energy Security Analysis Inc. "Most of that will get passed to consumers within three weeks."
The price rise could bring the cost of gasoline above the inflation-adjusted peaks in the early 1980s.
The AAA motor club on Wednesday showed the national average for regular gasoline at $2.62 a gallon, a nominal record. This compares with an average of $1.86 a year ago.