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Fuel Shortage in Parts of US Caused by Shut Down of Refineries During Hurricanes

Consumers in the southeastern United States are facing gasoline shortages and high prices for fuel at a time when the price of crude oil on the world market has fallen. As VOA's Greg Flakus reports from Houston, the recent hurricanes that struck the Gulf of Mexico coastline are the main reason for the shortages.

As recovery from Hurricanes Gustav and Ike continues in Houston and in other parts of the South, people trying to get back to work and normal routines are being hampered by a shortage of gasoline. The problem is most acute in the Atlanta, Georgia area, but also includes some other important southern cities like Chattanooga, Tennessee, and Charlotte in North Carolina.

Ken Medlock, an energy specialist at Rice University in Houston says the closing of refineries prior to the two hurricanes created a shortage in the gasoline distribution system for many areas.

"We had sort of a double whammy [hit]. Gustav resulted in about 15 percent of our nation's refining capacity being shut down, and Ike added another 19 percent. So, the fact that those storms were back to back means that for about three weeks, you had very limited refining capacity in this country."

Medlock says the Department of Energy is reporting the lowest gasoline inventories in the United States since 1967. But he says the problem will not last more than another couple of weeks, as crews get refineries back up and running at full capacity.

Another factor that will help lower fuel prices is the decline in crude oil prices on the world market. The price for the most common benchmark crude fell below $100 earlier this week, but it rose back over $100 after President Bush announced a renewed effort to get a financial bailout package through Congress by the end of this week. The U.S. stock market, which fell more than 770 points on Monday, regained some ground Tuesday on the expectation that a deal will be approved.

Ken Medlock says international crude oil prices follow these swings in the market because they are influenced by expectations of demand for energy.

"If the market really senses a full-blown financial meltdown, you will see crude oil prices dip, because, if that does occur, then the demand for crude oil should be a lot lower for some time to come," he said.

Medlock says an economic recovery would produce higher demand for energy and could result in rising oil prices. But, he notes, there are many factors influencing the price of petroleum, including strong demand in China, possible disruptions in supply and the value of the U.S. dollar.

Crude oil prices rose to over $140 a barrel earlier this year, but dropped dramatically in the past couple of months. Economists say a slowdown in demand was one factor. Some say the market has also responded to moves by President Bush and the U.S. Congress to open more U.S. coastal areas for exploration and development, since that could potentially boost supply in the years ahead.