Rush to beat surge in gas prices may backfire

Gas prices likely will rise because of Hurricane Rita, but economists say we'll make them rise faster by rushing to fill our tanks.

A collective rush to the gas pumps could have a more direct effect on gas prices than the hurricane in the short term, they say.

"These are almost like self-fulfilling prophecies, where people anticipate things and they all go crazy," said Haideh Salehi-Esfahani, a senior lecturer in economics at the University of Washington.

By filling up more frequently than they usually would to take advantage of lower prices, drivers increase demand, which sends prices up.

"No matter how much we tell people not to panic, just to be sensible and buy what they need, people still do [panic]," said Juan Palomo, a spokesman for the American Petroleum Association.

And they panic even though gas sold locally doesn't come from the Gulf Coast.

Most of our gas is refined in-state or in Alaska, said Frank Holmes, manager of the Western States Petroleum Association's Northwest region.

After Hurricanes Katrina and Rita shut down Gulf Coast refineries, prices of crude oil rose. That affected pump prices nationwide, industry experts say.

Salehi-Esfahani and other economists say that if everybody filled up this weekend, prices would climb. But demand — and prices — would decrease next week when tanks are full. Any effect caused by panic buying would be short-lived, economists said.

The phenomenon, a result of supply and demand, is one of the few things the oil industry, consumer-advocacy groups and station owners agree on when it comes to gas prices.

Nationally, prices rose 17 percent this week, but as Rita veered east away from Houston, prices for October delivery fell 5.38 cents a gallon yesterday.

Despite the predictions that high prices wouldn't last long, some local drivers filled up yesterday.

"I just want to have gas, and I prefer cheaper," said Neli Uzunova, who was pumping gas at a North Seattle ampm convenience store.

Before Hurricane Rita made landfall, the U.S. market lost 2.2 million barrels a day of gasoline production as the Gulf Coast oil refineries closed, according to the Energy Information Administration, the U.S. Energy Department's analytical arm.

Fifteen refineries closed in preparation for Rita, and four remained offline from Hurricane Katrina, which slammed into Louisiana and Mississippi nearly a month ago.

Retail gasoline prices were already rising nationally yesterday, and they are expected to go much higher if Rita causes a major disruption in petroleum supplies.

Some experts warned that a price spike was imminent in the Midwest, the destination for much of the gasoline made by the Texas refineries that have closed.

Tim Hamilton, an Olympia lobbyist who represents independent gas-station owners, predicted that gas prices here could rise to about $3.10 after Rita. He said oil companies are using hurricanes as an excuse. The real reason gas prices are rising here, he said, is increased exports, which limit supply.

Refineries are "self-rationing," Hamilton said, so they can charge more and make a bigger profit.

"If there's anybody profiting today from hurricanes, it's the oil companies that are getting all the money and the politicians who are getting free advertising for the November election by yelling 'gouging,' " he said.

Others said Hamilton's theory is unfounded and doesn't make sense.

UW economics professor Gene Silberberg said the reason for rising gas prices is simple.

"People should resist all these conspiracy theories that are floated around at times like this," Silberberg said. "This is plain old supply-and-demand working."

Emily Heffter: 206-464-8246 or eheffter@seattletimes.com

This report contains information from Reuters and Bloomberg News.