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Energy

Hurricane Isaac and Spiking Gas Prices

For the first time since Hurricane Katrina, the U.S. Army Corp of Engineers closed New Orleans, LA’s flood gates. Tomorrow, August 29, 2012, will mark the seventh anniversary of Hurricane Katrina. As luck or Mother Nature would have it, Tropical Storm Isaac was upgraded this morning to hurricane status, and it made landfall on the Gulf Coast at 7:45 p.m. EDT, about 96 miles southwest of the City of New Orleans.

Covered gas pumps are seen as residents head to the pumps in preparation for hurricane Isaac in Metairie, Louisiana (Photographer: Sean Gardner/Reuters, Source – Christian Science Monitor)

While the Republican National Committee (RNC) had to re-think, reshuffle, and make a few scheduling changes for its convention this week, several oil refineries in the area of the Gulf Coast also took precautionary measures and shut down.

The Seattle Times reported today that the price for a barrel of crude oil rose to $96.33 as Hurricane Isaac gathered strength on its way into the heart of the Gulf of Mexico’s oil and refinery operations. [Ref 1]  Well that sucks! After seeing gasoline prices inch up a bit over the past six weeks,  we get this jump in the price of crude oil due to normal and precautionary measures that several refineries are taking to avoid harm to workers and damage to operating equipment.  Notice there is no shortage of oil, and no oil has gone missing, at least not yet. All of this is happening because of a temporary disruption in the oil supply. I’ll be remiss in noting that all of this is coming before the Labor Day holiday weekend.

National Guard members drove through flooded Washington Avenue in Ocean Springs, Miss (Jeff Haller, photographer, New York Times)

Improvements made to the levees and other flood control infrastructure within and around the City of New Orleans, and the entire Gulf Coast, will be put to a test with Hurricane Isaac. That includes the oil rigs in the Gulf of Mexico and the refineries along the shore. Pipelines that send crude oil north to Chicago and gasoline east to Atlanta and other east coast cities could also be shut down. Either way, it is going to be a few days or as long as a week to know what impact if any the hurricane had on the equipment and operating systems. If there is no damage, prices will retreat, but I expect that they will do that anyway because Labor Day is the end of the summer driving season.

According to the Christian Science Monitor, the price of gasoline on the futures market ran up 28 cents a gallon on Monday of this week. On Tuesday, it backed off about 4 cents a gallon, but if it doesn’t come down a lot more, consumers will start to pay much more when they go to fill up the family sedan. [Ref 2] At the pump, gas prices are up about 4 cents a gallon to $3.76 from a week ago, up 27 cents a gallon from a month ago, and up 15 cents a gallon from a year ago, according to AAA. Once again, there is no “real shortage” of gasoline, just a possible disruption in the supply.

I have to chuckle and wonder why I don’t own stock in oil companies. It’s not much that anyone can do other than grin and bear it, and pray that the Gulf coast is in a lot better shape than it was seven years ago.

One more last thing…..I’d like to close by remembering those who lost their lives in Hurricane Katrina seven years ago.

References

  1. Oil ends above $96 a barrel, published on August 28, 2012 by the Associated Press, the Seattle Times, http://seattletimes.nwsource.com/html/businesstechnology/2019009229_apoilpricesglance.html
  2. Gas prices spurt as Gulf’s rigs, refineries brace for Hurricane Isaac, Ron Schere, Staff Writer, Christian Science Monitor, August 28, 2012, http://www.csmonitor.com/USA/2012/0828/Gas-prices-spurt-as-Gulf-s-rigs-refineries-brace-for-hurricane-Isaac
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About Vi Brown

Vi is principal and CEO of Prophecy Consulting Group, LLC, an Arizona firm that provides business and engineering services to private and public clients. Prior to establishing her consulting practice in 2001, Vi worked with Motorola, Maricopa County Government, Pacific Gas & Electric, CH2M Hill, and Procter & Gamble. As an adjunct faculty member, Vi teaches undergraduate calculus classes and graduate level environmental courses. She is also a professional speaker.

Discussion

2 thoughts on “Hurricane Isaac and Spiking Gas Prices

  1. I believe that OPEC does have control over gas prices. I mean they can raise them whenever they want on a holiday like Labor Day, but they wont lower them for convience on an everyday basis. They can only lower them when the pressure is on THEM. Gas prices are more influenced by negative news and events then it is by positive news and events. And to say that gas prices are not influenced by the Stock Market is nonsense. They definetly are. When the rich lose money in oil investments you can bet that gas prices will rise. We have seen it many many times right in front of our faces, but we deny it everytime.

    Like

    Posted by Healthy Mind | September 3, 2012, 5:11 pm

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  1. Pingback: Hurricane Isaac and Spiking Gas Prices « BridgeBizSTEM - September 1, 2012

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