Hurricane Sandy could boost gas prices temporarily
(MoneyWatch) Just as drivers were starting to get some price relief at the gas pump, disruptions from Hurricane Sandy could send prices up again. But analysts believe the spike will likely be temporary.
Last week, the national average gas price for a gallon of regular fell below $3.60 after a September peak of $3.87, according to the AAA daily fuel gauge. Prices had declined steadily through most of October and analysts were projecting that it was headed even lower as refineries switched from summer blend gasoline to cheaper winter blend.
Now the storm is hitting areas of New Jersey and Pennsylvania that include major complexes of refineries. But how big the price impact will be won't be clear immediately. Refineries belonging to companies such as Phillips 66 have shut down or sharply reduced production in an attempt to minimize damage.
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Spot prices today for wholesalers still taking delivery in the storm area are up five to 10 cents a gallon, according to Avery Ash, editor of the AAA fuel gauge report. That would typically lead to higher prices at the pump. But that could be offset, he notes, by "motorists staying off the road for an extended period of time."
Tom Kloza, chief analyst at the Oil Price Information Service believes that spike will be temporary because of that "demand destruction" caused by business closings, flooded roads and altered travel plans. That lower demand, he told CBSMoneyWatch, will more than offset the supply disruption from the refineries.
Kloza's one caveat: If there is serious damage that takes lengthy repair at one of the area refineries, the disruption could offset the effects of the extended drop in demand and lead to continued higher prices.
But absent such damage, Kloza expects the seasonal pattern of falling gasoline prices to resume. "We were on a steady road toward cheaper gasoline prices nationwide," he says. "This wobble to the upside in the Northeast will interrupt that for a few days. But I suspect prices will resume a strong downward bias in November."
