Drudge Report: Gas Scare Hits Atlanta.
Metro Atlanta drivers are facing the possibility of paying considerably more than $3 a gallon for gas by Labor Day -- if they can get it at all, The Atlanta Journal-Constitution is reporting Wednesday.
The two pipelines that bring gasoline and jet fuel to the region are down -- powerless to pump as Hurricane Katrina wreaked havoc on electrical infrastructure.
The metro Atlanta region generally has about a 10-day supply of gasoline in inventory, said BP spokesman Michael Kumpf. The pipelines have been down for two days.
Alpharetta, Ga.-based Colonial Pipeline Co., cut off from its suppliers on the Gulf Coast, is now pumping gas from huge storage tanks, many in Powder Springs, Ga. Whether electric power can be restored to the pipeline pumps before supplies run out is "the great uncertainty ... that hangs over all of us," said Daniel Moenter, a spokesman for Marathon Ashland Petroleum, a major supplier of metro Atlanta's fuel.
MarketWatch: Asia markets mixed; crude oil weighs.
In U.S. energy markets, unleaded-gasoline futures jumped more than 20% Tuesday to an all-time U.S. closing high as traders assessed damage in the Gulf of Mexico from Katrina.
One analyst characterized trading in the spot market as "pure panic."
Supply concerns also boosted crude futures to a new record of $70.85 a barrel, while natural-gas prices rallied nearly 5%.
"There is clear desperation among physical players actually looking for wet barrels of gasoline, and their desperation is leading to eye-popping premiums above gasoline futures," said Tom Kloza, chief oil analyst at the Oil Price Information Service.
"The panic is greater than anything I have seen since the Iranian Revolution," he said. In most places, gasoline prices will be "north of $3 a gallon," he said. Read the full story on gasoline.
Unleaded gasoline for September delivery traded as high as $2.50 a gallon on the New York Mercantile Exchange. It closed at $2.4745, up 41.39 cents, or 20.1%.
NY Times: Carriers Are Stricken by Cancellations and Lack of Fuel.
The airline industry felt the brunt of Hurricane Katrina yesterday, with some airports running low on jet fuel and carriers canceling hundreds of flights. Meanwhile, Wall Street feared that the financial problems of the sickest airlines could grow worse.
The industry's trade group, the Air Transport Association, said the nation's supply of jet fuel had been cut 13 percent because of damage to refineries on the Gulf Coast.
The association arranged for supplies of jet fuel to be shipped by air tanker to airports in Charlotte, N.C., and Fort Myers and West Palm Beach in Florida, where supplies had dwindled, the group's chief economist, John Heimlich, said yesterday.
The group also planned to send jet fuel by tanker truck as well as plane to other airports, Mr. Heimlich said. Of particular concern are supplies at two big airports -Hartsfield, serving Atlanta, and Dulles, serving Washington. Both airports generally rely on supplies from refineries in Louisiana and in Memphis.
MarketWatch: Assessing Katrina's long-term impact.
If disruptions in Gulf energy supplies are limited, retail gasoline prices could top $3 a gallon for a couple of months, said Nariman Behravesh, chief economist for Global Insight. High energy prices would likely cut consumption and knock 0.3 to 0.5 percentage points off U.S. gross domestic product.
"We are not at the worst-case scenario," Behravesh told MarketWatch. "But we are moving in that direction" as companies assess the damage to their facilities.
In a worst-case scenario, the storm could shut down deliveries of as much as 25% of U.S. energy needs for several months.
In that case, gasoline prices would average $3.50 a gallon for the next four to six months, Behravesh said, cutting U.S. growth to zero in the fourth quarter.
The key unknown is how much damage petroleum refineries suffered. The U.S. could conceivably import more crude petroleum to replace Gulf production, but it's almost impossible to replace lost refinery capacity.
Americans could be swimming in crude, but wouldn't have a drop of gasoline to run their cars.
Louisiana, Mississippi and Alabama are home to 24 refineries with daily capacity of 3.3 million barrels, said Michael Helmar, an economist for Economy.com. Sixteen of the refineries are on the coast.
The other major unknown is the condition of crucial ports to bring in imported petroleum and oil and gas produced in the Gulf.
The vital Louisiana Offshore Oil Port, the only U.S. port that can handle supertankers, apparently escaped major damage, the manager of the port told Dow Jones NewsWires.
The major onshore port at Port Fourchon, also escaped major damage, according to Dow Jones NewsWires. The port is the base for oil service operations for oil rigs in the Gulf.
However, the channel leading to the port may have suffered severe silting from the storm surge. Dredging the channel could take weeks or longer. There could be a "very large impact to the energy supply," if the port can't reopen, port manager Ted Falgout told CNBC.
The Henry Hub, the junction of several pipelines in central Louisiana that serves as the pricing point for natural gas, reopened Monday afternoon. The condition of pipelines leading to the Henry Hub from the coast is not known.