Chrysler just launched their new, big 2009 Dodge Ram truck, saying it is vital for their survival. If any of the Macho Truck Crowd were thinking that gas had gone back to stay "low" this should remind them that it was only a pause before advancing. Two steps back and four steps forward. Chrysler is done for.
Ike's aftermath: The return of $4 gas
NEW YORK (CNNMoney.com) -- Gas prices are poised to shoot back towards record highs after Hurricane Ike's direct hit on the heart of the nation's oil refinery base, analysts said.
In addition, Hurricane Ike could turn out to be the third-most expensive natural disaster in U.S. history, according to preliminary forecasts from a firm that does loss estimates for the insurance industry.
Experts say it's too soon to know exactly how bad the damage from the hurricane, which slammed into Galveston, Texas early Saturday, will be to refineries.
Some early reports suggested that damage to the refineries could be limited despite the nearly direct hit.
But production at the refineries, which produce nearly a quarter of the nation's gasoline, could still be affected if it takes weeks or months to restore full power to the region.
The uncertainty has experts projecting everything from gasoline soaring above $5 a gallon nationwide to an average price that remains just below the $4 mark. Gas prices already climbing
Many consumers throughout the Southeast have already started to see sharp increases in gas prices before the storm even hit. The latest nationwide daily survey by AAA conducted Friday showed prices up nearly
6 cents a gallon to $3.733.Some markets, particularly in the Gulf Coast and South, have been hit with a more than a 20 cent a gallon overnight increase. For example, the price of gas jumped 27 cents in Knoxville, Tenn. to $3.924.
"This is a fear factor among station owners," said Kevin Kerr, editor of Global Commodities Alert. "They're worried that they're not going to get any more supply or if they do it's going to be a lot more expensive."
To that end, gas prices soared three years ago in the week after Hurricane Katrina slammed into New Orleans. Prices jumped 17% to a then record high of $3.0569 due to damage to refineries and pipelines.
In a statement to CNN, the Department of Energy said it "is very concerned about the impact of gasoline prices on American families" and encouraged people to report price gouging at its Web site.
The Department of Energy added that it is ready to release crude oil from the Strategic Petroleum Reserve "when and where it is necessary to ensure refineries are capable of maintaining operations" and that is analyzing the amount of fuel production likely to be lost because of Hurricane Ike and Hurricane Gustav, which hit near New Orleans on Sept. 1.
Kerr said the path of Hurricane Ike was the worst possible scenario. There are about 20 refineries from Lake Charles, La., to Corpus Christi, Texas. All of them saw winds and heavy rain from the storm. Together, they have nearly 5 million barrels a day of refining capacity between them.
Almost half of that total capacity is concentrated in the Houston-Galveston area, which is where the center of the storm hit. Beyond refineries in the area, gasoline pipelines and other key transportation infrastructure could limit the supply reaching consumers.
"We could see gas go up to $6 in certain states. I think the baseline will be more like $4.50, maybe even $5," said Kerr.
The ExxonMobil (XOM, Fortune 500) refinery in Baytown, Texas, with a daily capacity of 567,000 barrels, is the largest refinery in North America. And the eye of the hurricane passed right over it.
CNN correspondent Ali Velshi reported Saturday morning that there was no apparent damage to the refinery that could be seen from outside it, despite extensive damage in Baytown.
Kevin Allexon, spokesman for ExxonMobil, said the company has yet to determine if there is damage that could further disrupt operations.
"There's still some pretty significant weather that affects how safe it is to do assessment work," he said.
Oil analyst Peter Beutel of Cameron Hanover said he's encouraged by initial reports suggesting that crucial oil facilities in the region survived without substantial damage. He's hopeful that if refineries can resume near normal operations later this week, gas prices will remain below record levels.
"Right now it looks like we took a licking and we kept on ticking, although it's still early to get full reports," he said. "As of now, I don't have reason to believe it's going to be a lasting factor. It doesn't look like you'll get to $4 nationwide, but you'll see $4 gas in a number of places," he said.
But Tom Kloza, the chief oil analyst for the Oil Price Information Service, which provides the data for the AAA survey, said he's worried about how long it will take to get full production going again.
"Even if we missed the worse of it, it's going to be a mess," he said. "U.S. refineries are really dependent on local utilities. When you hear them talking about power outages lasting for weeks, it's a worry."
The Department of Energy reported that 2.4 million customers were without power as of Saturday morning, essentially everyone in the direct path of the hurricane.
Kloza said fear of a political backlash could keep oil companies and wholesalers from raising prices as high as the market might support in the face of such a tight supply.
But he said that even if consumers are spared the full brunt of price increases, they could end up dealing with limited supplies in some markets.
"You're going to see a lot of stations in some places that don't have gasoline and you'll see some lines," he said. He's predicting nationwide gasoline prices to rise to about $4 a gallon, give or take a dime for the next month.
What's more, production at refineries along the Gulf Coast had yet to return to normal since they shutdown in preparation for Hurricane Gustav, even though the hurricane caused limited damage.
Kloza added that jet fuel, diesel and heating oil prices could sharply increase -- partly because they don't get the public attention or political scrutiny that gasoline prices do. Ike cost may only lag Katrina and Andrew
But Hurricane Ike will prove to be costly even beyond the impact on gas and other energy prices.
Catastrophe risk modeling firm AIR Worldwide Corporation said Saturday that it estimated insured losses to onshore properties would be between $8 billion and $12 billion. The firm said it expected significant wind damage to skyscrapers in Houston as well as to mobile homes and warehouses.
And EQECAT, a firm that does catastrophe estimates for the insurance industry, said its initial forecast for insured losses from Ike range from $8 billion to $18 billion.
The low end of that estimate would make Ike the fifth most expensive storm in history after adjusting earlier storms' costs for inflation.
But the high end of that forecast would put Ike behind only Hurricane Katrina and Hurricane Andrew as the most expensive natural disasters in U.S. history, according to the Insurance Information Institute.
Hurricane Katrina cost insurers an inflation-adjusted $43 billion, while Hurricane Andrew, which hit South Florida in 1992, cost the industry an inflation-adjusted $22.9 billion.