Hurricane Ike And Crude Oil

Many people out there would never accept any apologies for the devastation that Hurricane Ike had caused on his rampage through the Gulf of Mexico to Texas, but people should be grateful that he came when he came, and not later in the season. If he had developed later in the season and wreaked the same havoc, the cost to Americans in fuel oil would have been devastating. As it happens, gasoline prices went as high as five dollars a gallon in some west coast and Midwest states. Georgia and Alabama even saw prices of four dollars a gallon.

Even without an Ike type hurricane to impact the oil refineries in the Gulf of Mexico, Americans face consistently higher prices for home heating oil every year. There may be time to recover some of the damage this year due to Ike, but at least ten platforms were destroyed in that hurricane. Americans can expect the cost of replacing the platforms to be passed along to the consumer in higher gasoline prices and higher home heating oil prices.

Of course the raising of prices isn't directly a cause of Ike, fuel oil prices have just never gone down significantly. Forty years ago, gasoline was less than a dollar a gallon. But natural disasters like Ike and Katrina do pose a long lasting threat to the stability of fuel prices. When platforms are shut down for any length of time, our supply is diminished. This is guaranteed to raise the price of gas for the short term. When they are destroyed we see those price increases continue for a much longer time.

What some people are unaware of is that we are fortunate that Ike didn't damage the pipelines in the Gulf. The effects of a massive oil leak in the Gulf would have been devastating, not only in gas prices but also to our ecology and to the economy. Some larger oil companies will be able to swallow some of the higher costs to deliver fuel oil and won't have to charge as much as smaller companies for gas. But when you buy gas at a station, you aren't paying for the fuel they already have, but the fuel that will be delivered tomorrow. So if the oil company charged your station three dollars and fifty cents a gallon for a delivery tomorrow, you can expect to pay four dollars and twenty five cents today.

So because of Ike the prices on fuel definitely spiked, but in the long term, we were lucky that he didn't grace us later on in the season, leaving us with a longer lasting spike of fuel prices.

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