Hurricane Katrina: Gas Prices Soar

Gasoline Futures Surge and Crude Prices Rise in Aftermath of Hurricane Katrina

John Townsend , manager of Public and Government Affairs at AAA Mid-Atlantic, will be online Friday, Sept. 2, at 3 p.m. ET to discuss the surge in gas prices as a result of Hurricane Katrina and travel during the Labor Day weekend.

Read the story:

Gas Prices Soar (The Post, Sept. 1)

Spikes and Shortages Go Far Beyond Gas (The Post, Sept. 2)

A transcript follows.

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Anonymous: Are all Maryland gas stations shuttung down today?

John Townsend: During times of national or regional crisis, rumors spread more quickly than the truth. Given the current crisis stemming from the aftermath of Hurricane Katrina, there is a greater sense of hopelessness when things appear to be spiraling out of control. However, this is shut another rumor.

On the other hand, there are reports in the media that some stations are closing early to avoid shortage.

Despite the trying circumstances, you should be any to find plenty of gasoline. However, you might not like the price that you will pay for the increasingly precious commodity. Thanks.

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Washington, D.C.: For months, President Bush -- sometimes laughingly -- has said that there's nothing he can do about high gas prices. Is this the absolute truth?

John Townsend: To alleviate any shortages of gasoline across the country, President Bush recently ordered the Environmental Protection Agency (EPA) to grant a nationwide waiver for fuel blends to make more gasoline and diesel fuel available. This move will make more gasoline available to consumers. This was a wise move. It will help to make sure that there is plenty of supply out there.

In addition, the president also recently authorized release of crude supplies from the Strategic Petroleum Reserves. This move will help to calm consumers' anxiety.

AAA Mid-Atlantic applauds both decisions.

It behooves all of us to conserve during these difficult days in the wake of Hurricane Katrina. Though there are spot shortage in various parts of the nation, all in all, we are still in good shape because gas is in good supply. There is no reason for people in our region to panic.

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Baltimore to N.C.: I am heading to N.C. this evening. I am slightly afraid that I will run out of gas and not be able to make the drive at any price of gas. How likely do you think it is for the gas stations along 95S to run out of gas?

John Townsend: As FDR once famously said, we have nothing to fear but fear itself. This is especially true in this situation. Although things appear dire, and in several senses they are, you will have plenty of gasoline to make your trip to New York.

Just a moment ago, the governor of the state of Maryland issued a statement saying that the supply of gasoline in the state is robust and more than enough to meet our needs for the next two weeks.

We also just gotten reports about the supply situation in Virginia. While it was tight in Richmond yesterday, things are robust today. Everything is in flux, but you will make your trip with confidence and courage. The only thing you have to worry about is the price, which is increasing sharply, even as we chat.

I wish you Godspeed.

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Crofton, Md.: Will there be gas rationing in the Maryland area, and if so, how soon will it begin?

John Townsend: As I indicated, the governor has just announced that the supply picture in Maryland is good. It is enough to cover us for the next two weeks or so, if people remain calm and refuse to panic. Things are in good shape in Maryland. There is little reason to ration gasoline in the state at this juncture.

Thanks.

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Fort Myers, Fla.: When a gasoline vendor ups the price of gas by one or two dollars a gallon overnight, isn't that presumptively considered to be price gouging?

After all, the vendors already paid for the gas in his tanks, and his cost basis hasn't changed a whit.

I consider this gouging to be the moral equivalent of looting, with the notable exception being that no argument of necessity can be advanced in favor of gouging.

Do you agree?

John Townsend: Your moral equation is on target. Every time gasoline prices skyrocket, consumers become increasingly concerned about gouging. It is not only morally wrong, it is mean-spirited. Since time immemorial men and women have tried to exploit people. A crisis situation brings out the worst in humanity and the best in the human soul.

If anyone is guilty of this he should be brought to justice. The offices of the attorneys general in the state of Maryland and Virginia have been flooded with calls from consumers alleging price gouging. Those calls have been transmitted to federal officials, who have promised to look into the situation.

Sadly, there are people who always try to take advantage of others. You are correct. It is morally wrong. Fortunately, 19 states have passed laws preventing this type of activity in the aftermath of a crisis. However, neither Maryland nor Virginia have passed such laws.

Although prices are rising rapidly, it is hard to tell if the vendors and service stations are merely passing on their prices -- which are now higher -- or taking advantage of the situation. At this juncture, it appears to be the latter and not the former.

Thank you for being ever so watchful.

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Arlington, Va.: I have heard a rumor that gas deliveries, slated for the D.C. area, are being routed south to help in the recovery effort and that we are beginning to experience shortages here.

John Townsend: We should be in good shape. At this juncture we have not heard those reports.

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Bethesda, Md.: John, will you please educate people on what's going on here? It is Economics 101, which apparently people haven't taken.

You take 10 percent of the supply of gas out, keep the demand the same, and what happens? The price of gas will go up.

Now, I don't like paying the prices I'm paying right now, and I've got a gas guzzling sports car. But I'm getting sick and tired of having to explain to people that this is not price gouging, it is simply Economics 101 at work.

John Townsend: Dear Bethesda: Apparently you were not nodding off in your Econ 101 class. You have hit the nail on the head. The hurricane hit at ground zero of our refining process and our distribution network. Lives have been lost. For many people in the gulf states, their lives have been completely shattered. Their world has been turned upside down.

It is like a atomic bomb has been dropped on our gas supply network. In light of this horrific situation, prices will increase. The laws of supply and demand are at work.

It is as simple as that.

Thanks for your mastery of economic theory.

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Springfield, Va.: I don't understand the recent spike in prices. Has the hurricane really affected prices so quickly. In the past week prices have gone up $.50. The station across the street went up $.18 just today. What gives? Also, what can we do to make sure there isn't gouging going on?

John Townsend: Dear Springfield:

The current situation is borne of two forces. Nature and human behavior. Hurricane Katrina struck at the heart our refining and delivery system

We currently have an imbalance in supply-demand for gasoline in parts of the United States due to refinery and pipeline outages caused by Hurricane Katrina having reduced supply.

The second factor contributing to this is human nature. Panic buying actually increases demand, further stretching this imbalance. We encourage everyone to avoid panicking.

As bad as things are, they could be worse.

The refineries will be back up and running soon. That's amazingly good news.

There is no need to panic, which will make matters worse.

Keep your courage up and encourage others. We will get through this. That's a promise.

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Arlington, Va.: Are some states cheaper than others? I have to travel through northern Virginia, Maryland, Delaware, and New Jersey tonight (along the I-95 corridor) and I was wondering which state might give me the best prices to fill up my tank.

John Townsend: Dear Arlington:

Some states are indeed cheaper than others. Virginia traditionally is one of the most inexpensive places to buy gasoline in the country. So to is New Jersey. But in the wake of Hurricane Katrina, the prices have skyrocketed.

The current price in New Jersey is $2.81. The state average in Virginia is a penny higher at $2.82.

The current average price in Washington, D.C. is $2.87, which is the mirror image of this morning's national average, which is also $2.87.

The cost of a gallon of gasoline soared 16 cents to a new price record of $2.89 in the Washington metro, according to this morning's Daily Fuel Gauge Report from AAA Mid-Atlantic.

Realizing this, it is safe for you to make the trip, that is if you go with the understanding that you will face higher prices at the pump.

Enjoy your travels and shop for gas with your steering wheel.

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Washington, D.C.: For the Economics 101, sure Katrina is making things worse BUT gas prices were rising before, so what's the explanation for that?

John Townsend: Dear Washington, D.C.

It seems to defy an answer, or an easy one.

But you are 100 percent correct, prices were rising rapidly before we even heard of a hurricane named Katrina.

For example, the price of a gallon of gasoline in the Washington metro region jumped 35 cents during the period from August 8th to August 22. The price record was broken 11 times in August before Katrina became a factor in the current situation.

The same is true during July. The price record was broken nearly a dozen times in Washington, D.C., which is one of the most profitable markets in the nation to sell gasoline.

The reasons are many: the rising price of crude which has been flirting with record prices all summer long; the increased demand during the dog days of summer -- late July and early August.

Prices have jumped more than a dollar since this time last year. We are not only suffering from sticker shock, we all have the sneaky suspicion that someone is taking advantage of us. We have been over the barrel all year and, as consumers, we don't like it a bit.

Yet we have heard nothing from our national and political leaders until now.

At long last, the voices of the consumers are been heard. It took a crisis for official Washington to hear it.

Thanks for speaking up and out. You will be heard.

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Rosslyn, Va.: Not every price increase is an understandable function of economics. Some simply ARE price gouging.

John Townsend: Dear Rosslyn:

It is our hope that they will be brought to justice. We are tracking reports of stations charging exorbitant prices. I would appreciate you sending up the information on the stations that you suspect of price gouging. We will expose them and ask for an investigation.

Keep your eyes peeled.

Thanks.

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Falls Church, Va.: I sat through Econ 101 and a bunch more econ/finance classes, but supply and demand being what they are, if supply is cut 10 percent, why is gas up 30 percent? If anything, demand should be even, I'd guess -- people driving less balancing out people starting to hoard it.

John Townsend: Dear Falls Church:

We have all seen reports of stations in certain pockets of the country that are charging and raising prices to five dollars or more. Chances are, it is not justified.

However, for the most part, the typical increase is 40 to 80 cents in the Washington metro area. None of us like those kinds of increases and they bother us to the hilt. They, or should I speak collectively, we ought to outraged by this, if the reports prove true.

I would encourage you to also contact the attorney general in the state of Virginia with the specific details. It is a way of fighting back.

Thanks for sounding the clarion call.

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Richmond, Va.: I've seen several people filling up red plastic containers with gasoline, but it seems dangerous to travel with these in the trunk of your car. We're planning a trip south to Charleston this weekend -- would it be prudent to carry with us one of these filled containers?

John Townsend: Dear Richmond:

It is not prudent at all. It is potentially dangerous. It would do little to solve a shortage problem. You could not carry enough gas in those red plastic containers. Think about what would happen if a spark went off in your vehicle. It would be a disaster. Why would anyone put himself or his or her family in harm's way?

Filling those containers to avoid running out, contributes to the problem. It creates a sense of panic.

There are others ways of conserving gasoline.

We advise everyone to shop for the lowest gas price with your steering wheel. It's out there and you can find it. The supply situation is under control.

As we have save before and this is true wisdom for these trying time: practice good vehicle maintenance by making certain tires are properly inflated, the air filter is clean, the engine and chassis are properly lubricated and spark plugs are in good condition.

Finally, let cooler heads prevail.

We will make it through this.

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John Townsend: We have to wrap it up now. I thank you for participating and I thank you for your insightful comments and observations and your sharp and thoughtful questions.

If you are traveling this holiday weekend, drive safely, stay calm, watch for the cheapest price around, on some blocks there can be as much as a 10 to 30 cent difference in price.

Remember, at the end of the day, say a prayer for the people in the Gulf states who have lost everything. It may take a decade for them to recover. Some of them will never recover. That perspective will empower us to cope with this. We will survive, high prices and all. That's what counts in the cosmic scheme of things.

Have a great weekend.

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