Katrina Gas Prices

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How Hurricane Katrina effect gas prices Outrageous gasoline prices is something that all American face at the pump in today economy. Many American wonder what is the cause of the high rates at the pump. There are many factors involved in the answer to the question on what causes gasoline prices to increase suddenly. In 2005, Labor Day Weekend gas prices rose dramatically after hurricane Katrina hit the southern coast of the United States. The devastation of hurricane Katrina damaged many of the United States oil refineries, causing a decrease in crude oil supply, which caused a decrease in gasoline supply. The devastating damage to the oil refineries, along the southern coast of the United States, caused by hurricane Katrina, triggered…show more content…
“If world crude prices rise, then U.S. refiners must offer and pay higher prices for crude they buy. Facing higher input costs from crude, refiners charge more for the gasoline they sell at wholesale. This requires gas stations to pay more for their gasoline. In turn, gas stations, facing higher input costs, charge consumers more at the pump” (FTC, 2005. para19). As a result of gas station paying more for their gasoline, this will increase the amount the customer will have to pay for gasoline. According to the Federal Trade Commission, The storm “affected 19% of the United States oil production. Hurricanes Katrina (and a smaller previous Hurricane Rita) destroyed 113 offshore oil and gas platforms, damaged 457 oil and gas pipelines, and spilled nearly as much oil as the Exxon Valdez oil disaster”. This caused oil prices to increase by $3 a barrel, and gas prices to nearly reach $5 a gallon. Because of the devastation of hurricane Katrina many of the United States oil refineries were damaged, causing a decrease in gas supply. The damage to the oil refineries cause them to be shut down. With many of the United States oil refineries shut down, the supply of crude oil was effect and that is what caused an increase in gas prices. Hurricane Katrina resulted in an immediate loss of nearly 1.5 million barrels a day of crude oil from the
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