Hurricane Irene is taking aim at the East Coast coming with winds of 110 mph, according to the National Hurricane Center. Fears that the storm could upset oil supplies along the coast has caused a spike in gasoline prices.
Irene slammed the Bahamas on Thursday and could potentially reach refineries concentrated in New Jersey and Pennsylvania by Sunday afternoon. Refineries have started shutting off equipment and securing machinery.
Gasoline futures rose around 3 percent resulting in an increase in oil prices due to worries over the damage Irene could cause. September gasoline futures settled at 8.95 cents a gallon, higher at $2.9679 a gallon – the highest price since August 2 the Dow Jones Newswires reported.
"It's all about Irene and concerns about threats to infrastructure from flooding or loss of power," Andy Lebow, a vice president at brokerage MF Global in New York, told Dow Jones Newswires. "There's a lot of infrastructure up here from terminals to vessels, pipelines and refineries."
According to the Energy Information Administration, around 1.6 million barrels of operable crude oil refining capacity are located on the East Coast.
Refineries in Delaware, New Jersey, Pennsylvania and Virginia produce about eight percent of the country’s gasoline and diesel fuel.
Although the main buildings of the refineries are designed to withstand hurricane-force winds and earthquakes – some of the pipes, power lines, and cooling towers can be damaged by strong winds. According to the Associated Press, the utilities are expecting extensive power outages from winds and fallen trees.
“Even if the storm eventually misses them, they can’t take chances,” Ben Brockwell at the Oil Price Information Service, which monitors fuel shipments around the U.S., told AP.
Tom Bentz, an analyst at BNP Paribas Commodity Futures, said traders are predicting that supplies may be pressed.
Bentz said, according to AP: "There's the potential for certainly coastal flooding, potential for refinery outages, potential for shipping delays, things like that.”
Drivers are expected to see an increase in pump prices this weekend. People are currently paying anywhere from $3.89 in NYC to $3.95 in Stamford, Connecticut and $3.16 in Roanoke, Virginia.
Serious pressure would be placed on fuel supplies and prices if the refineries were to shut down for more than a couple days. AP reported that fuel stockpiles are already low because distributors are getting ready to switch over to wintertime grades of gas – which goes on sale in September.