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Gas prices spike on fears of Ike's impact

By Johnny Jackson

jjackson@henryherald.com

Metro Atlantans are likely to see gas prices average above $4 per gallon in the coming days. Prices began to rise significantly on Wednesday as the massive Hurricane Ike threatened to impact the Gulf Coast.

Ike's expected arrival in the nation's key refinery hub in and around Gavelston, Texas, has forced several refineries to suspend their operations, which will, in turn, slow gas production for the next couple of weeks.

The result - as refineries elsewhere in the United States try to make up for the production loss - will be more expensive wholesale gasoline for retailers.

"Wholesale prices went up the highest they have in the last 35 years," said Randy Bly, AAA Auto Club South spokesman. "The Houston-Galveston area has a total of 26 different refineries. That represents several million barrels of product that can't be refined into gasoline."

Hurricane Gustav caused less damage along the Gulf Coast than initially expected, but the storm's presence temporarily closed down refinery operations, all the same.

Bly said some refineries along the Louisiana and Mississippi coastline had not come back online, before Hurricane Ike threatened a second-round blast of high winds and precipitation.

"If, in fact, it doesn't do as much damage as they are fearing, the prices should come down in the following few weeks," he added. "But I think we're going to be in for a pretty rough ride for the next couple of weeks."

Record gas prices are possible for parts of the Southeast. Nevertheless, gas prices in metro Atlanta are still lower than the $4.10 per gallon for regular unleaded motorists averaged on July 17.

"We don't necessarily believe we'll see gas prices over $5 a gallon. [However,] realizing Ike is becoming a major storm - and it is heading right for the heart of the refining industry - a lot depends on what happens at the refineries."

The current gas prices are, therefore, not the result of crude oil or retail prices, but are the response to reduced refinery capacity in the Gulf Coast region.

"On the oil side, we're in excellent shape," Bly said. Crude oil closed on Friday at about $100 a barrel on the New York Mercantile Exchange, the lowest price for a unit of crude oil in months.

"On the other hand, we have gasoline," he added. "And panic buying will create shortages. That's going to be a problem."

Nationally, the price for regular unleaded gas averaged about $3.67 per gallon Friday, with metro Atlanta prices tipping $3.63 per gallon. Though wholesale prices may continue to climb in the wake of Hurricane Ike, some retailers may decide against taking on the extra cost and burden, Bly said.

"There may be stations that opt - once they run out of their existing fuel, they may not want to buy the next batch of fuel," he said. Bly expects high wholesale prices to be short-lived - two to three weeks of higher wholesale prices. Until then, consumers may have to suffer higher gas prices as they did earlier this summer.

One regional chain urged patrons to limit themselves to 10 gallons, and officials in some states tried to head off a run on gas by threatening to prosecute stations that gouge consumers. "We are encouraging motorists to exercise some restraint this weekend," said AAA Carolinas Spokeswoman Carol Gifford. "The run on gas is creating a crisis before there is a crisis."

As refineries closed, governors in North Carolina, Kentucky and Arkansas signed orders or made declarations allowing their attorneys general to enforce anti-gouging laws.

The Pantry convenience store chain, which has about 1,600 stations in 11 southern states, asked customers at about half of them to buy only 10 gallons of gas at a time. Similar requests were made during Hurricanes Rita and Katrina to slow panic buying, CEO Pete Sodini said. The chain's stores include Kangaroo and Petro Express.

Exxon Mobil Corp., Valero Energy Corp., ConocoPhillips and Marathon Oil Co., are among the companies that stopped refinery operations on the Texas coast, primarily in the Houston area. The area accounts for about 20 percent of U.S. refining capacity.

-- The Associated Press contributed to this article.