8/31/21 - Hurricane Ida may push gas prices even higher

Hurricane Ida's direct hit on the nation's oil and gasoline industry could send gas prices higher, exacerbating inflation that's already hurting American consumers.

New York (CNN Business)-       Hurricane Ida will impact how much we pay for gas but  how much prices will increase, and for how long, will depend on the extent of the damage. The storm hit Louisiana and the Gulf Coast on Sunday, killing at least one person and knocking out power for more than 1 million customers.

The price of a gallon of regular gas stood at $3.15 Monday, according AAA, up only a fraction of a penny from the previous day's average, and down 1 cent from a week ago. But wholesale gasoline futures were about 5 cents higher in early trading Monday. They were up as much as 10 cents a gallon in Sunday night trading, suggesting retail prices could soon follow suit.

Gas prices have already shot up nearly 80% from their low point in April 2020, when driving and economic activity broadly came to a halt because of the pandemic. But in the months since, Americans have been hitting the road in droves, sending demand for gas up sharply. Prices are up 41% since last August.

More than 95% of US oil production at offshore platforms and rigs in the Gulf of Mexico were shut down ahead of Hurricane Ida, according to the Bureau of Safety and Environmental Enforcement, the federal regulator overseeing those facilities. They will remain shut until further notice, said Tom Kloza, global head of energy analysis for the Oil Price Information Service, which tracks prices for AAA.

The major refineries in the region are shuttered or running at reduced rates, Kloza said, with with no word yet when they'll be back to normal.

Louisiana is home to three of the nation's seven largest refineries, and accounts for 17.5% of the nation's overall refining capacity at its 15 refineries, according to the US Energy Information Administration.

Another concern is that major pipelines carrying gas, diesel and jet fuel from the Gulf Coast to other states were also shut as a precaution ahead of the storm. The shutdown of one of those, the Colonial Pipeline, after a computer hack earlier this year, caused price spikes and gasoline shortages along parts of the East Coast.

Although the flow of oil from offshore platforms and rigs was expected to return to normal within a few days flooding or prolonged power outages could keep the refineries and pipelines offline, which could also push gasoline prices up, Kloza said.

Another potential disruption could come from consumers themselves. In May, panic-buying at the pump exacerbated price surges and shortages during the shutdown of the the Colonial Pipeline.

The greatest impact on gas prices will likely be in the Southeast, said Kloza, which was the area of the country with the cheapest gas ahead of the storm. All the states across the region have average prices below $3 a gallon today.

Another factor in the direction could be an upcoming meeting of OPEC oil ministers along with officials from Russia and several other major oil producers.