Oil spill won’t raise gas prices in short term

Oil spill won’t raise gas prices in short term

 

The disastrous oil spill off the coast of Louisiana isn't expected to affect U.S. gasoline prices in the short term, but it could produce a longer-term hit if offshore oil drilling is curbed or made more expensive with new regulations and safety measures.

Wholesale gas prices are up 15 cents a gallon since April 20, says Darin Newsom of analysis firm Telvent DTN. That's when a fire and explosion occurred aboard the drilling rig off the Louisiana coast. Crude oil prices are up 3.2% in the same time, Newsom says.

But the prices aren't rising because of the spill, which isn't large enough to put a noticeable crimp in supply, oil and gas analysts say. Instead, they're driven by normal seasonal demands as the summer driving season nears and on signs of a strengthening economy. "We are headed higher," for gas prices, says Tom Kloza, analyst for the Oil Price Information Service. But the spill, while a huge environmental and political story, "should not be a big supply-and-demand story."

The most immediate danger is that the 30-mile oil slick starts to disrupt tanker traffic in the Gulf of Mexico, slowing shipment of imported crude oil to two refineries in Mississippi and Alabama, says Andy Lipow, president of Lipow Oil Associates in Houston. Worst case, shipments of crude could be slowed on the Mississippi River between New Orleans and Baton Rouge, home to 11% of the nation's crude oil refineries.

The spill's bigger impact could be on offshore drilling. President Obama says no new leases will be approved until a review is done as to what caused the spill. Monday, California Gov. Arnold Schwarzenegger withdrew his support for a plan to expand existing drilling operations off the California coast, citing the massive oil spill.

The Gulf of Mexico, home to 28 oil rigs, produces 1.7 million barrels of crude a day, 31% of the USA's total oil production. The U.S. imports two-thirds of its oil. Drilling in the Gulf of Mexico is seen as one way to lessen dependence on foreign oil.

The timing of the spill "could not have been worse," given that Obama recently supported expansion of offshore drilling in areas where it was previously banned, says Philip Weiss, energy analyst for Argus Research. He expects offshore drilling to "cost more and be more heavily regulated" now.

British energy giant BP leased the rig and is responsible for the cleanup. BP's shares closed Monday at $50.19, down 17% from their April 20 close.

Source: [ USAToday ]