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NEW YORK Ė Pump prices are heading higher as Tropical Storm Isaac forces several major refineries along the Gulf Coast to halt production in preparation for high winds and heavy rains.
Fear of reduced gasoline supplies sent wholesale gasoline prices up 7.7 cents, or 2.4 percent, to $3.155 per gallon Monday. The average retail price for a gallon of gasoline in the U.S. rose to $3.75 on Monday, and it could pass $3.80 by Labor Day weekend, says Tom Kloza, chief oil analyst at the Oil Price Information Service.
In the Buffalo Niagara region, a gallon of regular averaged $3.88 on Monday, up 4 cents from a week ago.
Oil prices fell Monday because Gulf Coast refineries wonít be using as much in the next few days and damage to key operations in the Gulf of Mexico seemed less likely as the stormís winds arenít expected to be as strong as some had feared.
Refineries should also escape damage. But refinery owners often shut down operations in advance of a storm. These facilities consume enormous amounts of electric power and generate steam to cook crude oil into gasoline, diesel, jet fuel and heating oil. If a refinery loses power suddenly, operators canít properly clear the partially cooked oil out of pipes, and restarting the refinery can take several days or even weeks.
If refineries instead conduct what is known as an orderly shutdown, they can restart as soon as the power supply is assured again. The gulf refineries will likely stay offline for about three days.
About 1 million barrels per day of refining capacity is expected to be shut down, roughly half of the refining capacity in the stormís potential path. The U.S. consumes about 19 million barrels of oil products per day.
Benchmark oil fell 68 cents to end the day at $95.47 on the New York Mercantile Exchange. In London, Brent crude dropped $1.33 to $112.26 on the ICE Futures exchange.
There was renewed speculation that the Obama administration will release oil from the Strategic Petroleum Reserve, the nationís emergency stockpile of oil. The White House has said a release is one option for combatting higher oil prices. Benchmark U.S. oil has risen 22 percent since late June. Brent crude, which is used to price international blends that many U.S. refineries use to make gasoline, is up 23 percent in the same period.