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Al Grillo, Associated Press A worker uses ultrasound to look for weak spots along an oil transmit pipeline that leaked 200,000 gallons of oil in March 2006. BP Exploration Alaska Inc. began shutting down the Prudhoe Bay oil field Sunday after the discovery of unexpectedly severe corrosion. Click photo for larger image.
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Experts believe London-based BP's move to replace a leaky pipeline from its huge Prudhoe Bay oil field could push prices up 3 to 5 cents a gallon the next day or two, particularly on the West Coast, where much of BP's production is shipped to refineries.
Prices could rise even more, possibly flirting with highs reached last September, industry observers said yesterday. But they cautioned that it was too soon to gauge how high prices could go and how long the price run-up may last.
There tends to be a lag between rising prices for oil and the gasoline refined from it, and it's not clear how long BP Prudhoe Bay production will be absent from the nation's supply, although it's expected to be weeks or months. The company is replacing a 16-mile stretch.
"I don't think even BP knows how long it will take to shut down the pipeline ... and when production is going to be back on line," said Ryan Reed, economist for National City Corp. in Cleveland.
The average price for a gallon of regular unleaded in the Pittsburgh area yesterday rose to $2.999, up a fraction of a cent from $2.993 on Sunday and some 13 cents higher than the average $2.86 a month ago, according to a daily survey by AAA.
That's still well below the peak price of $3.13, set last Sept. 5 after gas prices soared after Hurricane Katrina wreaked havoc on Gulf Coast oil production and refineries.
Nationwide, the average price yesterday was $3.04, up from $3.03 on Sunday, $2.96 a month ago and $2.33 a year ago, AAA said.
Observers noted that the pulling of BP's production comes at a bad time, with the end-of-the-summer holiday travel season in full bore. If there's a plus, it also comes as the nation's crude oil stockpiles are unusually high for this time of the year.
On the New York Mercantile Exchange, crude oil rose $2.22, or 3 percent, to close yesterday at $76.98 a barrel, the second-highest since trading began in 1984, and some warned that a heat wave or storm could quickly push prices above $80.
"The market is already tight and the news from Alaska is the last thing we needed to hear," said Michael Fitzpatrick, vice president of energy risk management at Fimat USA in New York.
National City's Mr. Reed said the situation was unusual because the oil markets tend to price in volatility based on events in the Middle East and elsewhere. "We don't expect supply disruptions coming from the U.S. itself."
Because of a combination of higher interest rates and higher gas prices, "consumers are really getting hit on both sides," he said.
Some relief for consumers could come from the U.S. Department of Energy, which offered to loan crude oil supplies to refineries that request them by tapping into the nation's strategic reserves.
It's also possible that consumers, by trimming trips and using more fuel-efficient cars, may ease the potential pressure on prices, too.
Bevi Norris, director of communications for AAA East Central in Pittsburgh, said travelers already appeared to be more cautious this summer about taking long trips because of the higher prices.
"People still continue to take their trips. But what's different this year is they are weighing out the pros and cons of flying vs. driving,'' she said.
"Usually for a family of four, it's still cheaper to drive because if they fly, they have to rent a car. But more people are doing comparison shopping,'' she said.
Travelers also are "shortening the distance of trips and shortening the length of stay. They're doing whatever they can to try and save."
