Analysts: Hurricane Sandy could impact East Coast gas prices

The Sacramento BeeOctober 30, 2012 

— California motorists are finally seeing gas prices retreat below $4 a gallon after disruptions at oil refineries in the state sent them soaring for months.

Hurricane Sandy is not expected to trigger another run-up in prices here, though it could have an impact on the East Coast if supply there is disrupted, analysts said.

"For motorists west of the Mississippi, there may be little change in prices because of the storm, but as you head east … there may be disruptions at various levels," said Patrick DeHaan, senior petroleum analyst for national gas price tracker GasBuddy.com.

On Monday, GasBuddy said the average price of gasoline in the Sacramento area dropped below $4 a gallon for the first time since Aug. 11. GasBuddy said the average price in the area was $3.98 a gallon.

Area gas prices spiked 25.8 cents, passing $4 a gallon, just days after an Aug. 6 fire damaged a key Chevron refinery in Richmond. Local motorists absorbed a second hit earlier this month when a series of production disruptions at California refineries sent prices above the $4.50 mark.

Analysts said California prices are finally falling in line with lower wholesale gas costs and an increase in overall supplies.

GasBuddy said the national average price of gas on Monday was $3.56 a gallon – 23 cents lower than last month and 10 cents higher than a year ago.

On Monday, U.S. gas and oil markets reacted to Hurricane Sandy's punch as major refineries in the Northeast shut down or reduced production in advance of the storm's arrival.

The most significant shutdown was the Phillips 66 refinery at Linden, N.J. – the second-biggest in the Northeast with a capacity of 285,000 barrels per day.

Ordinarily, that would raise red flags on gas prices, but energy analysts said the sprawling storm will likely cut into fuel demand normally created by commuters in large metro markets. Many of those commuters are expected to stay home until the storm subsides.

DeHaan also noted that many gas-using businesses in the Northeast shut down operations in advance of Sandy's arrival, further cutting demand for fuel.

Crude oil markets reacted accordingly. Benchmark crude fell 74 cents to close at $85.54 a barrel Monday on the New York Mercantile Exchange.

Experts warned that gas prices could still wind up rising because of the storm, especially if floodwaters or damage prevent refineries for starting back up.

Even then, DeHaan believes California will be spared the worst. The state's market is relatively isolated, and is not connected to pipelines from other states.

"Hurricane Irene took a similar path up the East Coast in (August 2011), and in New York state, the price of gasoline went up only a few cents a gallon," DeHaan said. "So, I wouldn't think it would be more than 5 to 15 cents a gallon even in the impacted (eastern) states.

"West of the Mississippi, I would expect various small impacts … . Over the next three weeks or so, if nothing else happens, Sacramento could drop into the $3.70s or $3.80s."

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