Gas prices jump as Ike threatens

But oil falls amid demand worries

A Houston gas station runs short on supply yesterday as Ike threatens to strike Texas and its refineries. (Pat Sullivan/Associated Press)

NEW YORK - Gasoline prices jumped to unprecedented levels in the wholesale markets yesterday as Hurricane Ike tore across the Gulf of Mexico, threatening to strike Texas and its refineries.

Crude oil on the futures market, however, sank below $101 a barrel to its lowest settlement price since late March - a sign that investors are still worried about waning global demand.

The wholesale price of gasoline ranged from $4 to nearly $5 a gallon in the Gulf Coast throughout the day yesterday, said Tom Kloza, the publisher and chief oil analyst of the Oil Price Information Service in Wall, N.J.

That was up significantly from about $3 to $3.30 a gallon on Wednesday, Kloza said, and the surge drove up wholesale prices in other US regions, too.

Wholesale prices are what refineries charge retailers. Retailers then mark up those prices for the customer to make a profit - so if these wholesale prices hold, it could mean that pump prices for US drivers easily break through the July 17 record of $4.11 a gallon.

How fast those prices would hit the pump would depend on disruptions, if any, caused by Hurricane Ike.

The average US retail price for regular gasoline was at $3.67 yesterday, according to the Oil Price Information Service, auto club AAA, and Wright Express. Gasoline remains above $4 a gallon in just a few areas of the country, including Alaska, Hawaii, San Francisco, and Chicago.

The market's renewed storm worries arrive a day after the Energy Department reported a larger-than-expected drop in crude and gasoline inventories, and OPEC decided to cut excess production by about half a million barrels a day.

October gasoline futures rose 8.72 cents to $2.75 a gallon on the New York Mercantile Exchange.

But despite the heightening anxiety about Ike, investment funds continued to liquidate their crude investments, anticipating a slower global economy and a stronger US dollar. Light, sweet crude for October delivery on the Nymex fell $1.71 to settle at $100.87 a barrel - the lowest close since March 24.

The last time crude traded below $100 was April 2, and the last time it closed below that level was March 4.

Ike, following last week's Hurricane Gustav, was expected to blow ashore early tomorrow somewhere between Corpus Christi and Houston. Some forecasters predict it will strengthen from a Category 2 storm, to a Category 4.

Texas is home to 26 refineries that account for one-fourth of US refining capacity. Most are clustered along the Gulf Coast near such cities as Houston, Port Arthur, and Corpus Christi.

In Nymex trading, heating oil futures rose 1.31 cents to $2.92 a gallon.