Gas Price Gouging Hits Hurricane States

Sept. 12, 2008— -- As Hurricane Ike barrels down on Texas, the impact is being felt in other parts of the country as the oil industry comes to a near halt and reports of price gouging start to spread.

Fears of gas shortages are leading to exploitation in some parts of the Southeast, where some stations are reported to be charging as much as $6 a gallon for gas.

In North Carolina, Gov. Mike Easley has declared a state of "abnormal market disruption" and signed an order allowing the attorney general to enforce the state's anti-gouging law. In South Carolina, Attorney General Henry McMaster invoked a similar law for his state, and Kentucky Gov. Steve Beshear declared a state of emergency.

"Fear of price gouging is bad in the state right now," Mark Plowden, communications director for the South Carolina attorney general told ABC News. "Public panic can cause a run on the pump, creating more panic, so we are trying to control the situation."

His office has fielded hundreds of phone calls, and many other calls have been received by county law enforcement offices. Plowden added that the receptionist is fielding "a phone call every eight seconds on this topic."

"People have gone as far as calling 911 to report that gas is expensive," he said.

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South Carolina passed its law on price gouging in response to Hurricanes Katrina and Rita. Those hurricanes severely disrupted the oil pipeline that supplied oil to the area.

In the Columbia, S.C., area, some stations have been reportedly charging more than $5 with at least one report of gas selling for $5.59. In Tallahassee, Fla., there was a report of gas at $6 a gallon. Prices have also spiked in Kentucky and Virginia with reports of gas priced at $4.50 and $4.79, respectively.

In New Bern, N.C., one station raised its prices today from $3.98 a gallon to $4.98.

Gas in the mid-Atlantic and southern-Atlantic states was averaging just $3.60 last week, according to the Department of Energy.

Some analysts say that there are other factors at work, which validate price increases.

"In this situation the price spike is totally justified," said Phil Flynn of Alaron Trading Corporation. "You've got supplies at the lowest level they've been in many years and at the same time you have a surge in demand ahead of a storm."

Making matters worse, 97 percent of oil operations in the Gulf of Mexico have been temporarily halted. On average, more than 1.3 million barrels a day are produced in the Gulf. Natural gas production has also come to a near halt, with 93 percent of those facilities shut down, according to the Department of Energy.

"You already have supplies tighter because of Gustav," said John Kingston, director of oil for Platts News & Pricing, an industry research service. "Now real fears, not only shut down, but some refiners could flood and cause significant delays in refiners being damaged or flooded or power out for a week."