Sandy’s Full Effect on Fuel Prices Unknown Following Hurricane’s Landfall
While analysts expect gas prices to continue a downward trend as we move into the Thanksgiving holiday, the effect of Hurricane Sandy on both fuel production and consumer demand have left oil prices unsteady as the heavily populated U.S. east coast wakes up this morning to flooding, power outages and drastically reduced public services.
Emergency backup systems were being tested throughout the night to ensure that Wall Street activities would be able to resume in the midst of an almost entirely blacked out Manhattan Tuesday morning, but benchmark oil prices still edged up 12 cents to $85.66 per barrel in electronic trading on the New York Mercantile Exchange; that same value was down 1.3 percent on Monday, closing at $85.54 per barrel.
The uncertainty surrounding the short term effects on Sandy on fuel prices rests around the play between decreased consumer demand in the affected areas, the throttling back or outright shutting down of several east coast facilities and the potential for negative effects on oil imports as currently rough waterways along the coast return to more ship-friendly conditions.
Most concerning where the potential for a jump in prices at gas stations is concerned is the six oil refineries that saw production curbed sharply by the so-called super-storm, dropping the region’s daily production from 1.29 million barrels per day to a mere 700,000 barrels, threatening to cut east coast gasoline stocks to their lowest levels since 1990.
The exact effects of the storm on fuel production and availability will not be known until the region is able to take stock of damages; in the meantime, other world market centers are watching the situation closely, but without much concern.
“We do not see much downside risk for oil demand,” said a statement from Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London, noting that Sandy’s impact is “mildly bearish” for short-term crude prices.