The media is trying to make the case that Hurricane Gustav could drive gas prices back up, perhaps beyond mid-year levels and toward $5.
The argument is fairly simple. When Katrina hit the Gulf and shut down drilling and refining capacity, gas went from $2 to $3. One the back of an envelop, gas should go from its current level of $3.75 to $5 if all the same basics hold true.
Gas hit a high of $4.11 a gallon in early July. According to the AP, Jeff Rubin, chief economist at investment bank CIBC World Markets, said that record could be shattered if Gustav seriously disrupts offshore energy production.
If the storm does a great deal of damage, the Administration says it will open the Strategic Oil Reserve. It is likely that countries with strong political ties to the US, especially Canada and Mexico, would help soften the blow of any disruption by temporarily increasing exports.
Big storm. Little result.
Douglas A. McIntyre
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