Oil prices dive below $100 a barrel; gas prices spike on refinery shut down
WASHINGTON -- Oil prices closed below $100 a barrel for the first time in more than six months Monday, but the lower crude prices aren't giving drivers relief.
One-fifth of the nation's refining capacity continued to be shut down as companies continued to assess damage and wait for electricity to return. That fed supply concerns and boosted retail gasoline prices at the fastest pace in three years. There were reports of stations being out of gas.
The price of a barrel of crude oil for delivery in October dropped $5.47, or 5.4%, to $95.71. That was the lowest in seven months and the first time that light, sweet crude oil has closed below $100 since early March. The decline came amid expectations for continued low demand in theU.S., and early reports of limited damage to Gulf Coast production and refining from Hurricane Ike.
Since peaking at $145.29 at the close on July 3, oil prices have fallen more than 34%. But they are still up nearly $17 from a year ago.
"The market still looks like it wants to head lower," says Thomas Bentz, senior energy analyst at BNP Paribas Commodity Futures. Bentz says oil in the next few days may see-saw higher, but will likely be below $90 in the next few months.
Meanwhile, the nationwide average price of a gallon of regular gasoline was $3.835 Monday, up 18.7 cents from a week earlier, the Energy Information Administration said. That was the biggest one-week increase since the period following hurricanes Katrina and Rita in 2005.
There were "sporadic" reports of stations out of gas, says Jeff Lenard, spokesman for the National Association of Convenience Stores, which represents many gasoline stations. Some station owners were having trouble getting gas, but others were not buying available fuel because of high wholesale prices, he says.
Fourteen refineries continued to be shut Monday, according to the Energy Department. The department said the refineries appear to have "suffered minimal damage."
But American Petroleum Institute chief economist John Felmy says it will be at least a few more days before the Gulf refineries are running. The main issue is a lack of electricity. Firms not only need power to generate the machinery within the refinery, but to operate pipelines. Plus, the process of restarting a refinery usually involves a number of safety checks, he says.
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