Ike skews gas; some stations ask $5 a gallon

[September 15, 2008]  HOUSTON (AP) -- Pump prices jumped above $5 per gallon in some parts of the country Sunday as Hurricane Ike, which caused less destruction than feared, left refineries and pipelines idled and destroyed at least 10 offshore platforms in the Gulf of Mexico.

Far beyond areas struck directly by high winds and flooding, Ike left behind it a bizarre pattern of prices at gas pumps, with disparities of more than $1 a gallon in some states, and even on some blocks.

"We're on the other side of the looking glass," said Claire Raines, who lives near Knoxville, Tenn. "I just passed three gas stations with prices that ran from about $3.50 to close to $5 within walking distance."

Average prices exceeded $4 per gallon in Illinois, Indiana, Michigan, South Carolina, Hawaii and Alaska, according to auto club AAA, the Oil Price Information Service and Wright Express.

States fed directly by refineries along the Gulf Coast were particularly hard hit and supply may be sporadic for the next few weeks with refineries shut down, said Tom Kloza, chief oil analyst with the Oil Price Information Service.

A station in Knoxville, Tenn., was asking $5.19 for a gallon of regular gas. In Nashville, about 180 miles away, gas was going for $3.50.

Whatever pain is being felt at U.S. gas pumps will likely be a very brief phenomenon, analysts say. The dour drumbeat of the global economy has the vast majority of traders believing the world has lost its appetite for high-priced crude and gasoline.

The pain was immediate, however, for 22-year-old college student Isiah James. He bought four gallons of gas at $3.99 near the Columbus, Ohio, suburb of Worthington.

"You've got to work harder," he said.

Hurricane Ike appears to have destroyed a number of production platforms and damaged some of the pipelines in the Gulf of Mexico, federal officials said Sunday.

Fly-overs revealed that at least 10 production platforms were destroyed by the storm, said Lars Herbst, regional director for the U.S. Minerals Management Service.

"It's too early to say if it's close to Katrina- and Rita-type damage," Herbst said.

The MMS says Hurricane Katrina destroyed 44 platforms three years ago, and soon after Hurricane Rita destroyed 64.

Herbst stressed the assessments were preliminary, but the damage appeared far worse than that caused by Hurricane Gustav two weeks ago.

Specifics about the size and production capacity of the destroyed platforms were not immediately available.

Herbst said the aerial inspections showed Ike damaged several large pipelines, but the extent of the damage was not known, nor whether they carried oil or natural gas.

Since just before Gustav's arrival two weeks ago, nearly 100 percent of Gulf Coast crude production has stopped, or about 1.3 million barrels per day. About 98 percent of all natural gas production is on hold.

There was limited production between storms, but that ended as Ike approached.

Kloza said it's unlikely damage to platforms in the Gulf would keep prices up for long.

"It's not a big deal in the economy we see working in the oil market," he said.

The wave of higher gas prices across large sections of the U.S. stood in stark contrast to the direction of crude and gasoline futures Sunday on the New York Mercantile Exchange.

Nymex held a special trading session because of trader concerns over Ike.

The price for a barrel of light, sweet crude tumbled $2.43 to $98.75.

Gasoline futures fell more than 11 cents to $2.6563.

The crude sell-off came two days after a barrel of oil dropped below $100 for the first time since April 2.

Overnight, retail gasoline prices nationwide rose an average of more than 6 cents for a gallon of regular gasoline, to $3.795, according to auto club AAA, the Oil Price Information Service and Wright Express. That followed another 6-cent jump between Friday and Saturday.

Overnight changes in the national average for gas are usually measured by tenths of a cent.

However, because of ongoing damage assessments and uncertainty about how long it will take to get power restored, refiners were unable to say when they'd be able to resume production of gasoline and other fuels.

The Gulf also accounts for 25 percent of domestic oil production and 15 percent of natural gas output. That production was nearly 100 percent shut down Sunday, though Shell and some other producers had begun restaffing platforms and other offshore facilities that were not in Ike's path.

More than half of Texas' 28 refineries have been shut down because of Ike.

Valero Energy Corp., North America's largest refiner, said crews had found no significant structural damage at facilities in Houston, Texas City and Port Arthur.

The company said it had no timetable for when production would resume.

"Gulf Coast pipelines that carry crude oil and refined products to other parts of the country are also experiencing outages, which will further complicate the supply situation," Valero said.

Transocean Inc., the world's largest offshore drilling contractor, said Sunday that Ike moved one of its three moored, semisubmersible rigs in the Gulf about 2 miles to the north of its pre-storm location, and crews were trying to determine if it sustained any significant damage.

Another of the rigs, which was damaged during Gustav, kept its location, while the third was docked in Mobile, Ala., out of the storm's path, said spokesman Guy Cantwell.

The Department of Energy said Sunday it had agreed to deliver 200,000 barrels of emergency exchange oil from the Strategic Petroleum Reserve to ConocoPhillips' Wood River refinery in Roxana, Ill.

The department said it also will deliver an additional 109,000 barrels of emergency exchange oil from the Strategic Petroleum Reserve to Placid Oil's Port Allen, La., refinery along a Shell pipeline in Louisiana.

The oil was requested by ConocoPhillips and Placid because of supply disruptions. The deliveries were to begin Sunday.

[Associated Press; By JOHN PORRETTO and MARK WILLIAMS]

Associated Press writer Stephen Majors in Columbus, Ohio, contributed to this report.

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