Gustav likely to bring higher gas prices?

The brief respite for consumers at the gasoline pump may come to an abrupt end if tropical storm Gustav slams into the petroleum-rich Gulf Coast and its numerous refineries, just as Americans begin packing up cars for the Labor Day weekend.

Gustav was downgraded from a hurricane to a tropical storm Wednesday after moving over Haiti, but forecasters expected it to regain strength and move into the Gulf of Mexico in a few days.

Oil companies with operations in the Gulf began removing nonessential workers from rigs, platforms and other facilities Wednesday morning, and refiners were preparing too.

Output has largely been unaffected, even though there have been some minor production cuts. But oil prices spiked more than $2 to above $118 a barrel, rising for a third day as Gustav spun toward the Gulf.

"It's speculation just like it's always been," said Jim Smith, president of the Florida Petroleum Marketers & Convenience Store Association.

Smith said he didn't expect prices to jump this weekend.

"A penny or two (per gallon) over where we're at right now," he said. "But barring some catastrophic event like a refinery having to shut down ... I think we have good inventories right now."

Gregg Laskoski from AAA South in Tampa mentioned that about 40 percent of America's refineries are located in the western Gulf of Mexico.

His general formula is that for every increase of $10 a barrel we would pay an additional 25 cents a gallon at the pump.

Offshore the Gulf accounts for about 25 percent of domestic oil production and 15 percent of natural gas output.

Gasoline prices have dropped for seven straight weeks and, at a national average of $3.686 per gallon, gasoline hasn't been this cheap in four months.

Business weather research firm Planalytics said up to 80 percent of the Gulf's oil and gas production could be shut down as a precaution if Gustav enters the region as a major storm.

Decisions on production would be made when more was known about the storm's severity and direction, said Bill Day, spokesman for Valero Energy Corp., North America's largest refiner.

"With Gustav, we're watching day by day, hour by hour even," Day said.