HOUSTON -- With tropical storm Gustav heading toward the United States, Shell Oil Products US and Motiva Enterprises LLC are encouraging consumers to prepare for potential evacuations and do their part to maximize fuel supply. During a hurricane, temporary and sporadic supply interruptions may be unavoidable; however, Shell and Motiva have put many systems in place from their offshore rigs to their retail stations to better maintain consistent supply of gasoline for consumers.
"We typically see the most significant increases in fuel purchases less than 24 hours before a hurricane is set [image-nocss] to make landfall. This last-minute surge in fuel purchases can cause temporary and sporadic outages, so we encourage our employees and our customers to fill up early and often," said David Sexton, president of Shell Oil Products US.
The Texas Fuel Emergency Operations Center encourages the public to maintain half-full tanks during the hurricane season. They also suggest that drivers keep their tanks full when a storm has entered the Gulf of Mexico, while there is still time for the industry to re-supply the fuel system. The goal is avoiding sudden depletion of fuel during evacuation or while emergency operations are underway.
An overhauled Federal Emergency Management Agency has made prestorm planning and preparation a top priority in an effort to avoid a repeat of its 2005 mishandling of Katrina, said The Wall Street Journal.
It is too soon to judge where exactly Gustav will move ashore—forecasters say somewhere between Florida and Texas, according to the report. Their best guess points to a major hurricane striking the Louisiana coast Monday or Tuesday. Louisiana Governor Bobby Jindal Wednesday declared an emergency and activated the state's National Guard in advance of the storm. On the Gulf Coast, residents and local authorities began to prepare, though no evacuations had been ordered yet.
Consumers could face higher prices at the pump during the busy Labor Day holiday period as Gustav swirls toward the Gulf of Mexico on a path that could disrupt energy production, added the Associated Press. Any damage to oil and gas facilities—especially along the vulnerable Gulf Coast—could send retail gasoline prices spiking back above $4 a gallon, analysts say.
Fears about the storm pushed crude oil above $120 a barrel Thursday, but prices later fell into negative territory as traders bet the government will tap the Strategic Petroleum Reserve (SPR) if supplies are threatened.
Regardless of where the storm hits though, gasoline prices look to be headed higher. "Prices are going to go up pretty soon. You're going to see increases by 5, 10, 15 cents a gallon," Tom Kloza, publisher and chief analyst at the Oil Price Information Service, Wall, N.J., told AP. That's because supply worries over Gustav have pushed wholesale gasoline prices up nearly 40% along the Gulf in the last few days, meaning struggling stations—even those far away from states like Louisiana and Texas—will have little choice but to pass on the costs by ratcheting up prices at least temporarily.
Gasoline prices have dropped steadily over the last month as crude has eased from record levels. A gallon of regular gasoline shed about half a penny overnight to a new national average of $3.66—11% off the all-time high of $4.114 a gallon reached last month.
But if Gustav does major damage to supplies, consumers could see that record shattered. "If we have a Katrina-type event, you're talking about gas prices going up another 30%," said Kloza, whose firm tracks U.S. gasoline prices by surveying thousands retail outlets around the nation.
Gustav, approaching Jamaica with winds near 70 mph, could regain hurricane strength later Thursday and possibly enter the Gulf of Mexico—home of a quarter of U.S. crude production—as a dangerous Category 3 storm early next week.
Oil companies raced to remove workers from oil and gas platforms and braced structures for withering rain and wind.
The concerns pushed light, sweet crude for October delivery as high as $120.50 a barrel on the New York Mercantile Exchange, but prices later settled $2.56 lower at $115.59.
The whipsaw session was exacerbated by low-volume trading heading into the holiday weekend.
Still, oil's retreat in the face of a possibly dangerous storm surprised some oil market watchers, who attributed the move to speculation that the government could release supplies from the SPR to counter any drop in production from Gustav. The International Energy Agency said the 27-member body was prepared to tap its emergency stocks if needed.
"I think that's taking some of the steam out of this rally," Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates, Galena, Ill., told AP.
Oil was also being pressured by a government report showing that U.S. natural gas supplies jumped much more than expected last week because of weak demand, sending prices for the fuel plummeting.
Further weighing on oil prices was speculation that demand for energy could fall further if Gustav makes landfall. "If people start canceling their vacations to the Gulf because of the storm, we're probably going to have less demand for fuel than anticipated," Phil Flynn, analyst at Alaron Trading Corp., Chicago, told AP.
Atmospheric models showed Gustav heading toward Louisiana and areas devastated by Hurricanes Katrina three years ago Friday, though it was too early to pinpoint where it would strike. The storm not only threatens the more than 4,000 oil and gas rigs scattered throughout the Gulf, but also the dozens of oil refineries dotting the vulnerable coastline from Texas to Louisiana.
Royal Dutch Shell PLC has evacuated nearly 400 people and said it will bring in another 270 Thursday.
The company said production will be impacted. BP PLC was also removing personnel from the region that's home to about a quarter of U.S. crude production and much of its natural gas, while ExxonMobil said it was bracing its structures for heavy wind and rain. Transocean Inc., the world's largest offshore drilling contractor, said Thursday it had evacuated about 190 workers from five of its 11 offshore drilling rigs in the Gulf. Transocean has 1,550 workers in the region.
Weather research firm Planalytics predicted as much as 80% of the Gulf's oil and gas production could be shut down as a precaution if Gustav enters the region as a major storm. Gustav formed Monday and roared ashore Haiti Tuesday as a Category 1 hurricane. The storm triggered flooding and landslides that killed 23 people in the Caribbean. It weakened into a tropical storm, though it is likely to grow stronger in the coming days by drawing energy from warm open water.
Gustav is the first storm of the 2008 Atlantic hurricane season to pose a serious threat to offshore oil and gas installations in the Gulf. In 2005, Katrina and Rita destroyed 109 oil platforms and five drilling rigs.
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