Some stations out of gas; Ike blamed

September 22, 2008 6:25:29 PM PDT
Some gasoline stations in parts of the Southeast are out of fuel and shortages could persist for days as refiners continue to recover from the one-two punch of hurricanes Ike and Gustav. Industry officials also say a crush of people topping off tanks -- or panic buying in some cases -- can worsen the problem.

"The system is not equipped for that," said Jeff Lenard, spokesman for the National Association of Convenience Stores, which represents more than 2,200 gasoline retailers. "The system is equipped for people to buy gas once or twice a week."

Meantime, it's likely that gasoline will get more expensive following the biggest one-day spike ever in the price of oil Monday.

The surge in oil prices, which briefly climbed by more than $25 a barrel, was triggered by investors' anxiety that the government's $700 billion bailout of financial institutions will boost inflation. The dollar fell sharply versus its rivals, touching off frenetic buying of safe-haven investments including gold and crude-oil, which settled $16.37 higher at $120.92 a barrel.

Even with power restored to a dozen Louisiana refineries put out of commission by Gustav, Ike's approach closed or disrupted operations at another dozen-plus refineries along the upper Texas Gulf Coast -- an area that accounts for about 20 percent of the nation's gas and diesel production.

Analysts say the gasoline shortages across the Southeast should disappear in the next week, once Gulf Coast refineries resume normal production levels. For now, the major pipelines that deliver fuel to many parts of the eastern U.S. are ready for shipments -- the supplies just aren't available.

Jim Burton, the owner of a Chevron station in midtown Atlanta, was forced to shut down for four days last week because he ran out of fuel. His station was one of the few places in that part of town that had gas Monday. He directed traffic around his pumps as small lines started to form around lunchtime.

"I've been in business since 1959, and I've seen these things happen three or four times, but this is by far the worst I've seen," he said.

Added anxious customer Debbie Silverstein, a 51-year-old stay-at-home mom filling up her Toyota Sequoia SUV: "I didn't drive all weekend because this car isn't very fuel efficient. Now, I don't plan to go anywhere other than to pick up the kids."

The country also experienced temporary and sporadic gasoline shortages in 2005 in the aftermath of Hurricane Katrina.

Because of supply shortfalls, the average price for unleaded in Nashville on Monday was $4.08 a gallon, slightly higher than Atlanta's $4.021 average. The national average for a gallon of regular unleaded was $3.739 on Monday, according to auto club AAA, the Oil Price Information Service and Wright Express.

"I think it's a temporary situation, but consumers shouldn't be shocked if stations in their area run out of product," said Ben Brockwell, director of data, pricing and information services for the Oil Price Information Service in Wall, N.J. "The supply system was critically disrupted, and you can't shut something down and expect it to get started back smoothly without there being some aftershocks."

Gasoline prices remained relatively stable nationwide following Gustav, but prices spiked above $5 a gallon in some parts of the country as Ike approached. Some states had price disparities of more than $1 a gallon.

The storm, which struck the Texas coast 10 days ago, caused less damage to the region's energy infrastructure than feared. In most cases, the biggest issue for refiners has been getting electricity restored and their equipment restarted -- a process that can take several days because of the size and complexity of the plants.

"We're capable of running full operations, but we don't have the supply to maintain that kind of flow rate," said Steve Baker, a spokesman for Colonial Pipeline, which delivers gasoline and other fuel from Texas, Louisiana, Mississippi and Alabama to major cities in the Southeast and along the East Coast.

Baker said Monday the pipeline, which was not damaged in the storms, was beginning to get barrels from affected refineries, but he couldn't say when Colonial would be back at full capacity.

That all depends on how soon the refineries themselves return to normal operations.

Exxon Mobil Corp. said Monday its refinery in Baytown, east of Houston, was producing gasoline at reduced levels as units powered back up. That refinery is the nation's largest.

Valero Energy Corp., North America's largest refiner, said its facilities in Houston and Texas City were in the midst of a multi-day restart, while its Port Arthur refinery was still dealing with utility issues. In particular, the Port Arthur plant was without a fresh water supply it needs for cooling and other uses.

"It's not a simple thing to restart refineries after a hurricane," Valero spokesman Bill Day said.

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