Gasoline prices spike as Irene nears

Retail gasoline prices in the New York area rose sharply Friday, as Hurricane Irene threatened to roll over the city on Sunday.

Price tracking website GasBuddy.com showed many areas of the city, Long Island and Connecticut where gasoline was selling for more than $3.90 US a gallon, 30 cents higher than the national average.

Consumers were filling up as reports suggested refineries along the U.S. east coast will likely close. There are 10 refineries in the area that could be affected, responsible for more than seven per cent of total U.S. capacity.

Gasoline futures climbed on the New York Mercantile Exchange yesterday, closing with a gain of 4.59 cents, or 1.6 per cent, to end at $2.80 US a gallon.

With no companies announcing any closures, gasoline had given back some of that gain Friday, to close at $2.78.

The National Hurricane Center downgraded Irene to a Category 2 storm Friday morning and by 2 p.m. ET reported that its maximum winds had decreased to 155 km/h as it came within 500 kilometers of Cape Hatteras. It is forecast to affect a broad area, from North Carolina to Eastern Canada, with flooding and winds as high as 190 km/h.

Traders on the Nymex, shown in March, pushed gasoline futures higher by almost two per cent on Thursday. Mark Lennihan/Associated Press

Some forecasters think Irene could be the worst hurricane to hit the U.S. Northeast in 50 years.

Refineries are already starting to turn off equipment and tie things down.

"Even if the storm eventually misses them, they can't take chances," says Ben Brockwell at the Oil Price Information Service, which monitors fuel shipments around the country.

Refineries are sprawling complexes of concrete and steel that turn oil into gasoline, diesel and other kinds of fuels. While the main buildings are designed to withstand hurricane-force winds and earthquakes, some of their pipes, cooling towers and power lines are susceptible to wind damage.

Utilities are expecting widespread power outages from winds and downed trees.

It takes several days for a refinery to start operating again following a shutdown. And many would need almost a month to get back to full operation.

Tom Bentz, an analyst at BNP Paribas Commodity Futures, said traders are betting that supplies may be squeezed.

"There's the potential for certainly coastal flooding, potential for refinery outages, potential for shipping delays, things like that," Bentz says.

With files from The Associated Press Accessibility Links

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