Q&A: Why Did Ike Send Gas Prices Up?
Tuesday, September 16, 2008 3:54 PM
Symbols: SPR
(Source: The Atlanta Journal and Constitution)trackingBy Michael E. Kanell, The Atlanta Journal-Constitution

Sep. 16--Gas prices rose sharply over the weekend as Hurricane Ike hit Texas. In Atlanta, the average price of regular unleaded early Monday was $4.16 a gallon, according to atlantagasprices.com.

QUESTION: Why are the prices around town so uneven?

ANSWER: As gas supplies dwindled — and talk of a shortage increased — most gas station owners raised prices. Some lifted prices a "mere" 30 cents or so, some quickly yanked the number above $4 or even, in some cases, $5 a gallon. On an ordinary day, there is always a range of prices.When there is fear in the air, as there was over the weekend, a lot of drivers worry that if they don't buy now, they won't get any gas.

Q: Why did this happen?

A: Hurricane Ike came along and whacked the heart of the nation's energy-producing area two weeks after Hurricane Gustav blew through. The result was to dramatically cut production and delivery of oil and gas. As it happens, Atlanta gets most of its gas from the Gulf.

Q: Don't they keep reserves for emergencies?

A: Because prices have been so volatile, terminals don't keep as much gas on hand as they used to -- they don't want to get caught with high-priced product they have to sell cheaply. But even so, there is extra. And through a typical year, there are often ebbs in the shipments of gasoline that consumers never notice. That is because there is usually a lot of extra gasoline in various places along the supply chain, but especially in the big terminals, like that in Doraville. Gas largely stopped coming into Atlanta from the Gulf last week. What turned that from a significant shortage to a crisis was fear -- the fear of drivers that if they didn't act quickly, they could be left high and dry. Even in the best of times, the system cannot handle everyone filling up at the same time.

Q: But what about the huge pool of oil in the Strategic Petroleum Reserve?

A: The SPR, created under President Ford after the oil crisis of 1973-74, now holds more than 700 million barrels of oil. If the nation had to depend completely on the SPR, it would last a little more than a month at the current rate of use. But the reserve is really intended just to cover brief emergencies. It has been used twice, once during the First Gulf War and once after Hurricane Katrina in 2005.

The decision to tap the SPR rests with the president.

Q: Why did some stations close?

A: Because they ran out of gas, of course. Stations that sell a lot of gas may need refills several times a day. If those refills slow down (as they did) and demand picks up (ditto), you can run out.


Next Page >>
More Options



Subscribe to Email Alerts rss feed or RSS feeds rss feed for articles from more than 300 contributors and press releases, SEC filings and full text news from thousands of sources.


 
Rate :  Rate this Commentary  


 Number of Comments (0) Post Comment
 
  
Good Rating(+1)    Bad Rating(-1)
No Data Found

 
Enter Symbol
Enter Search String
Bookmark This Article
Email Article

Send this article by email


Recipient's Name
Recipient's E-mail
Your Name
Your E-mail
Related Quotes

 
  Home | Login |Research | Earnings | Scans | Chat Rooms | Charts | Submit Article | Join Blog Network | Contributors | Subscribe to RSS

copryright 2008 all rights reserved