-- Gasoline prices jumped at the fastest pace in three years over the weekend and topped $4 a gallon in some areas after Hurricane Ike, but oil prices fell Sunday as investors bet damage to the nation's oil and gasoline production will be less than expected.
There were warnings of gasoline shortages throughout the USA as energy production was at a near-standstill in the Gulf of Mexico. The government is releasing oil from its emergency stockpiles to refineries experiencing shortages.
Oil fell below $100 a barrel for the first time since March 4 in special trading in energy futures markets in New York. Gasoline and heating oil contracts also fell. But prices were for delivery in October, so the declines won't be immediately felt by consumers.
"The market is betting that the storm isn't going to be as bad as feared in terms of damage," Alaron Trading analyst Phil Flynn says.
Fifteen refineries on the Gulf Coast were shut down on Sunday, including ExxonMobil's Baytown, Texas, facility, the largest refinery in the USA. And 99.7% of oil production in the Gulf of Mexico was halted, the government said.
More than one-quarter of offshore crude oil produced in the USA comes from the Gulf of Mexico; 42% of U.S. refinery capacity is along the Gulf Coast, according to the Energy Department.
Federal officials said two drilling rigs were adrift in the central Gulf. But it will likely be several days before companies have a full assessment of damage to all facilities and can begin to bring production back online, American Petroleum Institute spokesman Robert Dodge says.
With refineries down, drivers likely will see isolated gasoline shortages, Oil Price Information Service analyst Tom Kloza says.
The U.S. average price of a gallon of regular rose more than 6 cents overnight to $3.795 Sunday, according to AAA and OPIS.
Prices have risen 11 cents since Friday — the biggest two-day jump since after Hurricanes Katrina and Rita hit in 2005 — and are $1 higher than a year ago.
Averages were at or above $4 a gallon in seven states. In Georgia, the average jumped more than 16 cents overnight to $4.025 Sunday, AAA and OPIS reported.
The government on Sunday said it was releasing more than 300,000 barrels of oil from the Strategic Petroleum Reserve to two refineries experiencing shortages, a ConocoPhillips refinery in Illinois and a Placid Oil refinery in Louisiana.
It was the third time in less than a week that oil was released from the emergency stockpile. Supply had already been disrupted by Hurricane Gustav.