Hurricane Sandy pushes gas prices ... down?
If anything, hurricane Sandy is depressing gas prices at a time when they're headed down anyway. So many motorists are staying home that demand for gas has fallen.
A gas station is submerged in floodwaters near the Gowanus Canal in the Brooklyn Borough of New York Oct. 29, 2012. Hurricane Sandy knocked out gas stations and refineries on the East Coast, but its biggest effect could be keeping motorists off the road, which is helping push down gas prices.
Keith Bedford/Reuters
For a superstorm, hurricane Sandy has had surprisingly little effect on gasoline prices.
On the morning after the storm made landfall, gas prices fell nationally by almost a penny per gallon. The following day, they fell another penny.
Even in areas hit hard by the storm, gas prices were up only nominally on the first day: less than a penny in Baltimore, Philadelphia, New York, and Boston, according to GasBuddy.com, a group of local websites that track gasoline prices. By the second day, they had stabilized or were falling again.
If anything, hurricane Sandy may be helping to push prices down faster.
That's because the storm hit an energy consuming area of the United States rather than an energy producing area. Thus, the impact of the storm will cause a bigger drop in demand than in supply. All those drivers in New York and New Jersey staying home could reduce gasoline demand by 1 million to 2 million barrels of gasoline per day over the next few days.
The storm also damaged two of the area's oil refineries, but that would account for a reduction in supply of only 200,000 to 300,000 gallons of gasoline per day.
"You could make the case that the drop in gas prices would be larger because of the storm," says Avery Ash, author of the AAA Daily Fuel Gauge Report..
Much will depend on how quickly those two refineries, Hess's Port Reading, N.J., facility and especially the Phillips 66 Bayway refinery in Linden, N.J., can reopen. Phillips 66 reported Tuesday that its facility had lost power and had some flooding in low-lying areas, but a decision to reopen would await a full assessment.
"If they can re open within the next two weeks, then the price effect will be minimal," says Patrick DeHaan, an analyst with GasBuddy.com. "For now, there's more optimism" the shutdown will be short-lived.
Another concern: Will port facilities reopen so that well tankers can discharge oil and supply those refineries? So far, all maritime facilities are closed until further notice, the Port Authority of New York and New Jersey announced Tuesday.
Assuming there are no surprises, "this storm is only going to serve to further depress prices," says Mr. Ash of the AAA.
After peaking at $3.87 a gallon on Sept. 14, average gas prices nationally have declined steadily to $3.52, as of Tuesday, according to the AAA Daily Fuel Gauge Report. Ash predicts they'll continue to fall through Christmas, reaching a low of somewhere between $3.10 cents and $3.30 a gallon.