REGION: Fill up now, gas price watcher warns

By BRADLEY J. FIKES - Staff Writer | Thursday, September 11, 2008 6:11 PM PDT ∞

Buy gas right away, because it's going to get a lot more expensive very soon.

That's the message from Charles Langley, who tracks gas prices for the North County Times.

Refinery disruption caused by Hurricane Ike's passage through the Gulf of Mexico has sent gas prices soaring in the Gulf Coast area, and a significant reduction in oil refining production is likely for the next week or two, according to the Oil Price Information Service.

Gas prices should be rising nationwide as the shortage affects supplies everywhere, said Langley, a consumer advocate with the Utility Consumers' Action Network, a San Diego-based watchdog group.

"Gulf Coast trading this morning is absolutely frantic, and we have seen spot deals done at $4.25 gal (a gallon), then again above $4.50 gal, with current offers near the $5 gal neighborhood," OPIS stated in a Thursday bulletin.

First to be hit by the prices will be independent gas stations not affiliated with any brand, said Langley, adding that Escondido in particular has many of these stations.

"When they have to replenish their tanks tomorrow, they might go into sticker shock at the prices," he said of the independent stations.

As for customers, Langley said to act immediately and not wait for the higher prices.

"The smart money says to fill up right away," he said.

The market's renewed storm worries arrive a day after the U.S. Energy Department reported a larger-than-expected drop in crude and gasoline inventories, and the Organization of Petroleum Exporting Countries decided to cut excess production by about half a million barrels a day.

Light, sweet crude for October delivery on the Nymex fell $1.71 to settle at $100.87 a barrel ---- the lowest close since March 24. During trading, the contract dropped as low as $100.10 a barrel.

The last time crude traded below $100 was April 2, and the last time it closed below that level was March 4.

Ike, following last week's Hurricane Gustav, was expected to blow ashore early Saturday somewhere between Corpus Christi and Houston. Some forecasters predict it will strengthen from a Category 2 storm, with winds near 100 mph, to a Category 4. Ike ripped through Cuba and killed at least 80 people in the Caribbean.

Texas is home to 26 refineries that account for one-fourth of U.S. refining capacity. Most are clustered along the Gulf Coast near such cities as Houston, Port Arthur and Corpus Christi. Exxon Mobil Corp.'s plant in Baytown, outside Houston, is the nation's largest refinery.

The big question is whether a possible disruption in gasoline distribution ---- not to mention the slow economy ---- would crimp demand and drive gasoline prices back down again.

"This could end up looking just like Katrina, whereby prices spiked substantially and came down just as hard," said Linda Rafield, senior oil analyst for Platts, the energy research arm of McGraw-Hill Cos.

When Hurricanes Katrina and Rita scoured the Gulf Coast in 2005, she said, "the U.S. economy was in the mature phase of a business expansion." Now, the economy is slowing, so demand could suffer even more.

OPEC responded to falling crude prices and waning demand Wednesday by reducing output by 520,000 barrels a day.

"OPEC was trying to slow this steep decline," said Mark Pervan, senior commodity strategist with ANZ Bank in Melbourne, Australia. "But we're in a bearish trend right now and I still expect the price to fall another $10."

Material from the Associated Press was used in this article. Contact staff writer Bradley J. Fikes at (760) 739-6641 or bfikes@nctimes.com.