NEW ORLEANS -- Drivers are being hit with the biggest one-day jump in gasoline prices in 18 months just as the last heavy driving weekend of the summer approaches. As Hurricane (since downgraded to Tropical Storm) Isaac swamped the nation's oil and gas hub along the Gulf Coast, it is delivering sharply higher pump prices to storm-battered residents of Louisiana and Mississippi--and also to drivers up north in Illinois, Indiana and Ohio, reported the Associated Press on Wednesday.
The national average price of a gallon of gasoline jumped almost five cents Wednesday to $3.80, the highest ever for this date. Prices are expected to continue to climb through Labor Day weekend, the end of the summer driving season.
"The national average will keep ticking higher, and it's going to be noticeable," Patrick DeHaan, senior petroleum analyst at Gasbuddy.com, told the news agency.
The wide storm shut down several refineries along the Gulf Coast and others are operating at reduced rates. In all, about 1.3 million barrels per day of refining capacity has been affected. Drivers in Louisiana, Alabama, Mississippi and Florida saw gasoline prices rise by a dime or more in the past week.
But some states in the Midwest are suffering even more dramatic spikes, said the report. Ohio prices jumped 14 cents, Indiana prices soared 13 cents and Illinois prices jumped 10 cents on Wednesday alone according to the Oil Price Information Service (OPIS). Days before Isaac is expected to douse those states with rain, the storm forced the shutdown of a pipeline that serves a number of Midwest refineries.
As Isaac fades away, the summer driving season ends, and refiners switch to cheaper winter blends of gasoline, stations owners should start dropping prices, said the report. "There is some very good relief in sight," DeHaan said.
The refineries are not expected to suffer long-term damage. But refiners decided to shut down or run at reduced rates to protect their operations.
In advance of Isaac, refineries instead conducted what is known as an orderly shutdown, so they can restart as soon as the power supply is assured again. The Gulf refineries will likely stay offline for about three days, AP said.
Isaac cut into the amount of gasoline being produced, and raised fears that supplies could fall dangerously low if the storm proved worse than expected. When supplies drop or are threatened, wholesale prices rise. Then distributors and station owners have to pay more to fill up their station's tanks. They then raise their prices based on how much they paid for their current inventory, how much they think they will have to pay for their next shipment, and, how much their competitors are charging.
Prices spiked particularly high in the Midwest because Isaac forced Shell to close a pipeline that delivers crude from St. James, La., to refineries in the region.
Gasoline prices are particularly vulnerable to spikes around this time of year. Refiners keep a low supply of more expensive blends as driving season ends, knowing they'll soon be able to make cheaper winter blends of gasoline.
"We are really working with a just-in-time delivery system," Tom Kloza, chief oil analyst at the OPIS, told AP.
Pump prices were on the rise even before Isaac blew in, the report said. The average price for gasoline rose about 40 cents from July 1 to mid-August because of higher oil prices and refinery problems in the Midwest and West Coast. At $3.80 per gallon, the national average is the highest since May 1 and well above the previous record for August 29, $3.67 in 2008.
Wednesday's jump of a nickel was the 10th biggest one-day jump on record, according to OPIS, and the biggest since the average price rose six cents on Feb. 15, 2011, when turmoil in Libya was rising.
But prices could quickly come down if refineries can soon get up and running, the report said. Crude oil prices fell Wednesday and wholesale gasoline prices fell the past two days, suggesting the spike in retail gasoline prices could be short-lived. Americans will soon do less driving, and the switch to cheaper blends will be well underway by mid-September.