AAA: Isaac and gas prices

What kind of impact might Hurricane Isaac have on gas prices? According to AAA, the storm is already having an impact on production, so the answer probably isn’t one we want to hear.

Twenty percent of production was shut down early in the day on Tuesday as evacuations got unde rway. A refinery operator can’t risk losing power, or getting damage inflicted by high winds while running the plant. So, it’s best to be safe and shut down a refinery ahead of a storm.

Forty percent of refining capacity in our country comes from the part of the Gulf where the storm appears to be heading.

It is too early to tell how much impact it will have – that all depends on where it hits and with what intensity. That being said, most hurricanes do not make landfall and do any extensive damage to Gulf Coast refineries. The notable exceptions are famous: Hurricane Katrina, Hurricane Rita, Hurricane Gustav, and Hurricane Ike.  But most hurricanes come ashore and immediately after landfall, refineries in the threatened area restart.  In the end, hurricanes always impact the U.S. in terms of curbing demand. People drive considerably less when there is very inclement weather.

Some good news: our fuel stocks are up and consumption has been down. Even though demand for gas has been below last year’s we have had almost a record year for gasoline production, a major factor in our high inventories currently.

Summer blend period ends Sept. 15, but retailers can sell it until supplies are gone—we are allowed to burn summer blend into cool weather, but not allowed to burn winter fuel past change over deadline. End of summer blend should contribute to lower prices.