U.S. gas prices finally hit plateau

yah, what's up up with the whole country's gas prices stabilizing for the holiday weekend?
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U.S. gas prices finally hit plateau
Repairs of damaged pipelines, refineries increase supply

David R. Baker, Chronicle Staff Writer

Wednesday, September 7, 2005

After soaring above $3 per gallon last week in Hurricane Katrina's aftermath, gasoline prices have stabilized throughout the country as frantic repairs open pipelines and refineries closed by the storm.

The nation now pays an average of $3.04 for a gallon of regular. Stunning as it is, that price represents a drop from Monday's peak of $3.06, according to the AAA auto club.

California drivers spend just a bit more -- $3.05. As in the rest of the country, California peaked on Monday and saw prices dip Tuesday, albeit by a fraction of a penny.

"It seems like the worst is over, unless some new problem of a significant nature presents itself," said Sean Comey, spokesman for the AAA of Northern California.

The run-up in prices stalled as gasoline started flowing again through major pipelines that serve the East Coast, the scene of shortages and $5 gas last week. A crude oil pipeline connecting the Gulf Coast to the Midwest has reopened, feeding refineries along the way.

Three of the 10 coastal refineries shut by Katrina are restarting, although with varying levels of success. More than 58 percent of the gulf's offshore oil production remains shut by the hurricane, a significant improvement from the 95 percent reported closed last week.

Progress repairing Katrina's damage has calmed the market for crude oil, which briefly topped $70 per barrel last week and fueled the spike in gas prices.

The federal government's decision to both loan and sell oil from the nation's Strategic Petroleum Reserve also has eased prices.

Crude fell for the second consecutive trading day Tuesday, dropping $1.61 to close at $65.96.

"It's still a nervous market," said Jeff Tillery, senior research analyst at Pickering Energy Partners.

"To the extent we keep seeing infrastructure coming back and moderate damage, crude could come down. But it's a tough call," he said.

Indeed, the full extent of the storm's damage to offshore oil facilities and underwater pipelines remains unknown and could change the market's mood as more information emerges, pushing oil and gas prices higher. So could another storm -- a distinct possibility midway through hurricane season.

And several coastal refineries flooded by the storm have suffered serious damage, with no estimates yet of when they might start operations again.

"I suspect that we'll be stuck with relatively high (gas) prices for at least the next month or the next month and a half," Comey said. "And that's if we don't get another hurricane."

Katrina has left gasoline prices near all-time records set in 1981, when President Ronald Reagan lifted price caps during the Iran-Iraq war. California's average, when adjusted for inflation, peaked at $3.08 that spring.

Within the Bay Area, San Francisco and Santa Rosa have some of the highest prices, with both averaging $3.07 for a gallon of regular, according to AAA. Oakland pays about $3.04, while San Jose's average is $3.02.

E-mail David R. Baker at dbaker@sfchronicle.com.

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