Hurricane Katrina and Gas Prices

Various rumors about the effect of Hurricane Katrina on gasoline supplies and prices.

Claim:   Various rumors about the effect of Hurricane Katrina on gasoline supplies and prices.


Origins:   In the wake of Hurricane Katrina, which hit the U.S. Gulf Coast in late August 2005, gasoline-related rumors quickly began flying among consumers already concerned about short supplies and high prices of gasoline (especially since Katrina struck the week before the Labor Day holiday weekend, when many families take end-of-summer driving vacations). Here are some of the more prevalent Katrina-related rumors about gasoline we’ve collected in the aftermath of that hurricane:

  • An e-mailed rumor claimed that Florida gas stations would be closing and would remain closed for two or three days (due to the interruption of product from Gulf Coast refineries which supply gasoline to much of South Florida), prompting panic buying and long lines at some South Florida stations. However, Florida state officials maintained that although gasoline may temporarily be in short supply in some areas due to production interruptions caused by Hurricane Katrina, the state still had plenty of gasoline, companies were working to get additional supplies from the Northeast and overseas, and no multi-day gas station closures were planned.
  • Another e-mailed rumor from the Charleston, South Carolina, area claimed that not only would gas stations be shut down, but schools would also be closing due to a lack of diesel fuel for school buses:

    Hey ya’ll! I hope that everyone is doing well. Things in Charelston (SC) are good and hectic as usual. I just wanted to let ya’ll know that I heard from my uncle today and it is not looking too good with gas right now. Not to freak you out, but you need to keep a full tank of gas in you car no matter what it costs. He is already having to shut down some of his gas stations and he thinks that they may even have to shut schools down as early as next week because there won’t be enough deisel to run the school buses. I know that ya’ll are probably thinking that I am trying to create mass hysteria and that I am being paranoid, but Frank is a gas distributor for the midlands and owns quite a few gas stations so I feel like this info is coming from a reliable source. Just wanted ya’ll to be aware of this. Hope all is well. I love ya’ll and hope ya’ll have a wonderful day. Sorry to be a “Debbie Downer”!!!

    This sounds like the typical school closure wish fulfillment fantasy that every child dreams of in the wake of disruptive events, particularly large snowstorms (“Yay, it’s a snow day!”). We haven’t been able to verify any reports of gas station or school closures in the Charleston area. News accounts indicate that bus transportation has been curtailed due to diesel shortages for schools in the Orlando, Florida, area, but only for extracurricular activities.

  • Another rumor maintained that Venezuela was offering discounted gasoline to poor Americans and victims of Hurricane Katrina:

    The Venezuelan government is offering oil directly to organised communities, especially poor, at prices that beat those of oil companies. Address yourselves to the Venezuelan Embassy in Washington.

    It was true that in the aftermath of untowards comments made about him by 700 Club President Pat Robertson, Venezuelan President Hugo Chavez offered to make free eye surgery and discounted gasoline available to poor Americans, and he extended his offer to include water and food as well as fuel for the victims of Hurricane Katrina:

    Last week Venezuela’s President Hugo Chavez was attacking the U.S. for comments from 700 Club President, Pat Robertson, about calling for an assassination of

    the leader; Tuesday Chavez is offering aid to the victims of Hurricane Katrina.

    “We place at the disposition of the people of the United States in the event of shortages we have drinking water, food, we can provide fuel,” Chavez tells Associated Press.

    Chavez says fuel can be sent to the United States through a Citgo refinery that has not been affected by the hurricane. Citgo is owned by Venezuela’s state-owned oil company, Petroleos de Venezuela. He also offers to send aid workers to the gulf coast.

    Chavez made an offer last week for discount gasoline to poor Americans suffering from high oil prices and offered free eye surgery for Americans without access to health care.

    Chavez is heavily criticized for his socialist/communist ties in Latin America and has had negative relations with Washington for years.

    How many Americans take up President Chavez on his offers (and actually receive the promised goods and services) remains to be seen.

  • Another e-mailed piece spread rumors about gas station shutdowns around South Carolina, similar to the rumor cited above about purported South Florida station closures:

    They shut down all Gas pipes today @ 12:00 due to New Orleans-leaks in the pipes. Please keep your vehicle full at all time. All stores got what they got now and will not get anymore until further notice. It will not be how much gas cost but have much we have left.

    How do I know this? My husband works for some convenience stores in Lancaster, SC and his boss man also own a gas company. When he went to order some for his company that is when they told him. I have no clue if it has been on the news yet or not.

    Please let everyone know about this. I was told by another source that some of SC stores are out of gas now. BP Station closed their down yesterday.

    Some gas stations in eastern states did close after Hurricane Katrina due to short supplies, a situation caused by shortages at wholesale terminals in several states (which prompted wholesalers to restrict the amount of fuel retailers could buy) and exacerbated by panic buying by consumers fearful of short supplies and high prices in the immediate future.

    Similar rumors about gas station shutdowns in the Memphis, Tennessee, area also proved to be unfounded, as did rumors about government-imposed shutdowns or rationing in Georgia.

  • Other rumors spoke more directly of gas rationing throughout the entire East Coast:

    I just talked to my dad who works for a propane/gas company in Richmond. They just received a company wide memo that as of midnight tonight, the entire East Coast will be going on gas rations. Just thought I’d pass the word, that you may want to fill up tonight, because there is no telling what you’ll pay tomorrow. Hope all is well!

    It is true that gasoline began to be “rationed” immediately after Hurricane Katrina as refiners and wholesalers put many eastern marketers on allocation (i.e., restricted the amount of fuel they could buy), but this form of rationing technically applies to retailers, not to customers. Gasoline has effectively been rationed in the sense that many customers have been unable purchase it because individual retailers have run out of product, or individual retailers have placed limits on the amount purchase per-customer purchases, but we do not know of any plans for government-instituted gas rationing programs.

  • Rumors focusing on gas prices claimed that the cost of gasoline would be increasing by up to 50% to 70% over (already high) pre-Katrina prices:

    I don’t know if this is accurate or not, but I have no reason to believe that it isn’t. A lady that goes to my church here in Anderson received a call this morning from her cousin who works for an oil refinery, and he told her that calls were going out to the gas stations TODAY Aug. 31, to raise prices over 4.00/gallon. (Possibly 4.50 – 4.70 in some places.) If this is true, you would be wise to go get your gas this morning before your station gets the call! Just thought I’d give you a heads up, just in case.

    Higher gasoline prices, at least in the short-term, are an inevitable effect of the supply disruption caused by Hurricane Katrina, but whether they will hit the upper end of the $4 to $5 per gallon range and how long they might stay there is speculative. As of now, according to Bloomberg news, the national average retail price of gasoline may rise to $3.22 a gallon, although some analysts have forecast short-term prices at $4 per gallon. Frenzied buying has reportedly caused gas prices to spike well above the $4 per gallon mark in high-demand metropolitan areas such as Atlanta.

  • Rumors also focused on shutdowns of major pipelines carrying gasoline, fuel, and heating oil:

    Possible Gas Shortage

    My brother in law is an engineer for Colonial Pipeline, they move all the gas and fuel oil from the Gulf coast to the Northeast. He said the main pipeline will shut down today at noon and will not reopen until Saturday, he warns of possible gas shortages in the eastern U.S. On the way home you may want to top off your tank.

    Several pipelines carrying refined oil products in the Gulf Coast area, including Colonial Pipeline, did close just before or during Hurricane Katrina. According to Bloomberg, Colonial expects to re-open two pipelines by the weekend:

    Eight refineries in Louisiana and Mississippi closed during the weekend, halting at least 1.79 million barrels a day of capacity. Four pipelines carrying refined oil products between New Orleans and Baton Rouge, Louisiana, are also shut, Royal Dutch Shell Plc said. Colonial Pipeline Co., which runs the world’s biggest network of petroleum-product pipelines, said it would restore shipments on two fuel lines this weekend.

  • Another Katrina-related rumor about shortages and price increases involved something other than gasoline, but we’ll include it here anyway:

    I heard today from the checkout lady at the grocery store that over 60% of America’s coffee comes from Louisiana. She said the price of coffee is going to go up very soon because of the hurricane.

    It’s true that coffee prices may also increase in the short term due to Katrina’s disrupting the delivery and importation of that product. Louisiana isn’t a major U.S. supplier of coffee in the sense that beans for the popular beverage are grown there, but New Orleans is a major port of entry for coffee (about a sixth of the coffee imported into the U.S. is stored there), and supplies of the product warehoused in New Orleans may have been damaged by Hurricane Katrina. (The Chicago Board of Trade has said there were almost 733,000 bags of coffee, each weighing 132 or 150 pounds, in storage in New Orleans on the day Katrina moved ashore.) However, rumors about coffee price increases remain largely speculative until coffee-storing New Orleans warehouses are inventoried and assessed for damage.

  • Last updated:   1 September 2005

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