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Hurricane Ike fuels higher gas prices, shortages
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A gallon of regular unleaded gas was selling for $5.35 a gallon at the Crossroads Center in Lexington today.
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Published: September 12, 2008
Updated: 09/12/2008 06:35 pm
A run on gasoline ahead of Hurricane Ike fueled long lines and rising prices today as Gov. Easley warned against price gouging and others urged patience until the hurricane's effect on Gulf coast gas refineries can be assessed later this weekend.
A few stations, including the Quality Mart on Stratford Road, ran out of gas this afternoon.
Gov. Mike Easley gave the state attorney general the authority to enforce the state's price-gouging law when he declared a state of "abnormal market disruption" today.
"As a result of Hurricanes Gustav and Ike, oil refineries in Texas and Louisiana have temporarily interrupted some gasoline supplies to the pipelines that serve North Carolina. Therefore, there may be temporary limitations on our gas supply. However, wholesale gas prices are up less than 20 cents a gallon over the last few days. Therefore, consumers should not see prices rise substantially more than this rise in the wholesale price," Easley said in a statement.
Some stations, including the Crossroads Center in Lexington, increased the price of regular unleaded gas to more than $5 a gallon.
David E. Parsons, the president and chief executive of AAA Carolinas, urged gasoline consumers to be patient.
"The fear of what might happen if these refineries are severely damaged has caused widespread panic resulting in some stations running out of product, some stations raising prices dramatically in anticipation of high fuel replacement costs, and some stations trying to restrict the number of gallons being purchased," he said.
AAA Carolinas said that since North Carolina continues under a state of emergency from Hurricane Hanna, stations should not charge more for gasoline than what the gasoline in the ground cost the station plus the margin of profit that existed 60 days before the state of emergency was declared.
In neighboring South Carolina, Attorney General Henry McMaster is invoking a state law that allows criminal penalties against gas stations that set their prices too high.
Industry experts offered their thoughts on why gas prices tend to rise before a major storm such as Hurricane Ike hits land.
"The traditional practice in the business is that you charge for your replacement costs not for the costs of the product you are selling right now," said Tom Crosby, a spokesman for AAA Carolinas.
Service station owners may decide to raise their prices because they have to pay more when their product comes in.
With the likelihood of reduced gas supplies to North Carolina, possibly for a couple of days, some stations could be trying to find ways to get people to reduce their gas consumption and buy less than they normally do, said Michael Walden, an economics professor at N.C. State University.
Economically, the way you get people to buy less is to have the price go up," he said. "You can appeal to them, and say, 'Please buy less,' but most people will buy more."
Also, Walden said, it is not good business for retailers to let their tanks run dry.
"Retailers want to have gas available," he said. "They want to be able to stay open."
The Pantry, a Sanford-based company that operates 460 stores in North Carolina, is asking customers to limit their purchases to 10 gallons at a time.
Melissa Anderson, a Pantry vice president, said today that her company didn't have supply problems but was being proactive.
"People aren't connecting the dots that if you have a big hurricane off the Gulf of Mexico that it can very well impact the supply in North Carolina," she said. "What we're telling people is that we're in a period where supply could get tight, so be conservative and conserve where you can," she said.
She said that the company did something similar during hurricanes Rita and Katrina, and a few stores ran out of fuel after those hurricanes.
The company's 10-gallon limit is voluntary, and the company does not track compliance, Anderson said. But she said that customers had been receptive to the request.
Dinah Burnette stopped at the Kangaroo on South Stratford Road this afternoon to get gas before heading to the beach.
"I saw the sign and thought it (the pump) was going to turn off automatically," Burnette said. "I felt really bad, so I shut it off at just over 11."
At 2:30 p.m. the station was selling regular unleaded gasoline for $3.56 a gallon.
Supply to North Carolina isn't a problem yet, said Colonial Pipeline spokesman Steve Baker. The pipeline, which brings most gasoline into the state, is filling all of its orders, he said.
After Katrina, prices spiked to $3 a gallon, then a high price, and some stations ran out of gasoline.
Gasoline prices spiked in many areas Thursday, with prices at $4 a gallon not far from Pantry headquarters but prices to the north in the Raleigh area averaged $3.68, according to the AAA auto club. The average gas price today in Winston-Salem is $3.67, according to AAA.
Exxon Mobil Corp., Valero Energy Corp., ConocoPhillips and Marathon Oil Co. were among the companies that stopped refinery operations on the Texas coast, primarily in the Houston area.
Pantry CEO Pete Sodini said the company's request was designed "to head off any panic buying. What you're going to do if you go out and fill up every car in the household, you're going to run this market out of supply temporarily."
Sodini said the limit may be dropped Friday at some stations, depending on the supply of gasoline.
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