Gasoline up, crude down
NEW YORK–Gasoline prices jumped at the wholesale level yesterday – and as early as overnight Thursday at retail pumps in Toronto – as Hurricane Ike churned up the Gulf of Mexico.
The hurricane prompted companies along the Texas coast to close refining and drilling operations.
Yet crude oil on the futures market, however briefly, sank below the psychologically important mark of $100 (U.S.) a barrel 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.
U.S. fuel demand is so weak right now that the recent surge in the wholesale price of gasoline – which rose to about $4.85 a gallon in the Gulf Coast market yesterday, well up from less than $3 Tuesday – 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 (OPIS).
Ike was forecast to land today as a Category 3 hurricane near Galveston, a barrier island about 80 kilometres southeast of Houston. The Houston region is home to about a 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, as refineries anticipated that Ike would lead, at least, to a significant pause in their operations and, at worst, damage to their facilities. 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.
Wholesale prices are determined by major players in the supply chain including refining and trading companies, which constantly buy and sell barrels.
These prices end up deciding what refineries charge distributors, before they get marked up further at the retail level for the consumer.
The average U.S cash advance loan. retail price for gasoline edged up less than a penny to $3.675 yesterday from Thursday, according to auto club AAA, OPIS and Wright Express.
"We’re already seeing some big price hikes at some of the retail stations," said AAA spokesperson Geoff Sundstrom. "People should brace themselves for a potential return of gasoline close to $4 a gallon in the next couple of weeks nationwide."
Forecasters said the storm already packs winds of more than 160 kilometres an hour.
In Canada, gasoline prices spiked yesterday by as much as 13 cents (Canadian) a litre in some parts of Canada, including southern Ontario where the retail price was more than $1.36 a litre. In Montreal, prices jumped about a dime to $1.38 a litre, while prices were up to about $1.33 a litre in Halifax and $1.42 in parts of Newfoundland.
On the New York Mercantile Exchange, light, sweet crude for October delivery fell six cents to settle at $100.18 (U.S.) a barrel in afternoon trading, after briefly sinking to $99.99.
October Brent crude, in London, fell six cents to settle at $97.58 a barrel on the ICE Futures exchange, after closing at a six-month low the previous day, as October gasoline futures climbed 0.11 cent to $2.76 a gallon on Nymex. Exxon Mobil, Valero Energy, ConocoPhillips and Marathon began halting Gulf operations, as Ike headed straight for the biggest U.S. complex of refineries and petrochemical plants.
Ike is huge, taking up nearly 40 per cent of the Gulf of Mexico. Forecasters warned it could be a Category 3, with winds of at least 180 km/h, before the eye strikes land.
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