Gustav Likely to Push up Gas Prices for Labor Day

Drivers might want to top off their tanks early before hitting the road for Labor Day weekend.

A Coast Guard boat passes fuel oil storage tanks Wednesday, Aug. 27, 2008 in Bayonne, N.J. The brief...

A Coast Guard boat passes fuel oil storage tanks Wednesday, Aug. 27, 2008 in Bayonne, N.J. The brief respite for consumers at the pump may soon come to an abrupt end as preparations for Tropical Storm Gustav curtail refining activity near the U.S. coast. Gasoline supplies already have fallen sharply for four straight weeks and further strains on production will likely exacerbate the situation. (AP Photo/Mark Lennihan)

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Consumers will likely face higher prices at the pump during the busy holiday period as Tropical Storm Gustav swirls toward the Gulf of Mexico on a path that could disrupt energy production. Any damage to oil and gas facilities — especially along the vulnerable Gulf Coast — could send retail gas prices spiking back above $4 a gallon, analysts say.

Fears about the storm pushed crude oil above $120 a barrel Thursday, but prices later fell into negative territory as traders bet the government will tap the Strategic Petroleum Reserve if supplies are threatened.

Regardless of where the storm hits though, gas prices look to be headed higher.

"Prices are going to go up pretty soon. You're going to see increases by 5, 10, 15 cents a gallon," said Tom Kloza, publisher and chief analyst at the Oil Price Information Service in Wall, N.J.

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That's because supply worries over Gustav have pushed wholesale gas prices up nearly 40 percent along the Gulf in the last few days, meaning struggling filling stations — even those far away from states like Louisiana and Texas — will have little choice but to pass on the costs by ratcheting up prices at least temporarily.

Gas prices have dropped steadily over the last month as crude has eased from record levels. A gallon of regular gas shed about half a penny overnight to a new national average of $3.66 — 11 percent off the all-time high of $4.114 a gallon reached last month.

But if Gustav does major damage to supplies, consumers could see that record shattered.

"If we have a Katrina-type event, you're talking about gas prices going up another 30 percent," said Kloza, whose firm tracks U.S. gas prices by surveying thousands retail outlets around the nation.

Gustav, approaching Jamaica with winds near 70 mph, could regain hurricane strength later Thursday and possibly enter the Gulf of Mexico — home of a quarter of U.S. crude production — as a dangerous Category 3 storm early next week.