$7 a gallon gas? Yes, a National Crisis is Coming

Rita is now due to have a direct hit through Port Arthur, TX. Steve Gregory speaks to rainfall totals of 20-30 inches in some locations. And, Dr. Jeff Masters indicates that despite Rita being a Category 3 or 4 hurricane at landfall, that she will carry to the coast a Category 4 or 5 level storm surge along a 40-60 mile stretch of coast, causing widespread destruction in the cities of Port Arthur, Orange, and Cameron.  

Analysts say that refineries rarely suffer catastrophic wind damage and that the real danger is flooding. ... Extensive flooding in Port Arthur, Tex., or Lake Charles, La., would cause prices to spike, possibly as high as $6 or $7 a gallon, doubling the widespread assumptions of $3-a-gallon gas that are expected in the aftermath.

Either way, it's going to be disruptive. With refiners shutting down and assuming 4 million barrels per day of capacity is shut in for at least five days, the lost production would amount to 20 million barrels.

"Rita will have a significant impact on petroleum product markets even without significant damage similar to Hurricane Katrina," Merrill Lynch analysts conclude.

A Forbes article entitled, $7 A Gallon Gas?, points to the fact that due to demand and politics that the end of hurricane season won't mean a return to cheap gasoline.

Better fill up now!