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Gustav Could Pose Big Threat To Gas Prices

Katrina Caused Almost 50 Cent Jump In Prices

Wednesday, August 27, 2008 – updated: 5:32 pm EDT August 27, 2008

Gas prices of more than $4 per gallon in time for Labor Day weekend are likely should Hurricane Gustav continue its track toward the Gulf Coast, a gas prices expert said.

Gustav, now a tropical storm after making landfall in Haiti, could lead to a hike in gas prices as the oil platforms in the Gulf of Mexico become abandoned.

Jason Toews of Gasbuddy.com said that the "notorious" impact that Hurricane Katrina had on gas prices in the United States could be seen again.

"The Gulf of Mexico area has a large percentage of oil production and refining," Toews said. "When Katrina hit, it knocked out 8 percent of the refining capacity. For supplies of retail gas to go down by 8 percent is a huge shock to the system."

Hurricane Katrina caused an almost 50 cent jump in gas prices over a five day period of time: from $2.589 per gallon of regular gas right before labor day to a peak of $3.068 on Sept. 3.

"Over the course of three or four days, that [type of hike] was unheard of at the time," Toews said. "I don't think we've seen anything like that since. Gas has been high this summer, but it was more of a gradual increase."

Oil prices have climbed since Monday on the fear that the storm could enter the Gulf of Mexico as a hurricane, but AAA reported that as of Wednesday morning, gas prices haven't started to climb.

Companies are preparing to shut off their pipelines on the ocean floor and possibly evacuate thousands of offshore workers as Tropical Storm Gustav takes aim at the Gulf of Mexico.

There are more than 4,000 oil and gas installations in the Gulf. In 2005, Hurricanes Katrina and Rita destroyed 109 oil platforms and five drilling rigs.

Toews said that it takes time for crude oil to go from the ground to the refinery to gas stations -- three months if it comes from the Middle East, less if it comes from Texas.

"More often than not, if crude oil prices are going up, oil companies will pre-emptively raise gas prices to slow demand," Toews said. "Oil companies don't like to scare off consumers. If they can ease people into price hikes, consumers are less likely to change their habits."

"We've seen gas prices come down significantly, but it's still high and supplies are tight. It's a bad time to have a hurricane on a holiday weekend," he said.

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