There were no surprises in today’s update on second-quarter GDP, but the aftermath of Hurricane Katrina has kept everyone guessing on the energy front.

The Gulf of Mexico is home to the processing and distribution of about one-quarter of America’s energy, and that house is reeling. Katrina delivered a potent punch to the energy business, and the immediate impact is soaring gasoline prices. As of Tuesday, roughly 95 percent of the Gulf’s oil production and 88 percent of its natural gas production is off-line, the Houston Chronicle reports. Maybe now the political momentum to clear the way for the development of new gasoline refineries will find traction.
Meanwhile, number crunching the nationwide fallout from the Katrina-induced energy crunch is job one in the dismal science. Accordingly, the formerly arcane statistics of motoring habits have become fertile ground for intelligence gathering as economists scramble to figure out what lies ahead. In a sign of the times, a Wall Street Journal article today considered the finer points of American refueling habits. Car owners typically keep their tanks one-quarter full, the Journal (subscription required) reports. But that was before. Today, and tomorrow, with fears of shortages coursing through the nation, there’s a possibility that drivers will prefer to keep tanks full. If so, that could lead to even higher prices for gasoline.
“What you don’t have in the system is the ability to run every car full of gas,” Dan Pickering, president of Houston-based Pickering Energy Partners, tells the Journal. “If you get a hoarding mentality among the consumers, then it tightens the system even further. Fear of shortage begets the shortage. It becomes a vicious circle.”
The first step has already arrived with the rationing of fuel supplies at the supplier level. Thanks to Katrina’s legacy of refinery shutdowns along the Gulf Coast, energy wholesalers say they are being forced to limit sales of fuel, according to Bloomberg News. Meanwhile, the White House sought to calm markets by announcing it would release oil from the Strategic Petroleum Reserve. That helped send oil futures lower in New York trading today.
Considering the pullback in oil in the wake of Katrina one pundit wondered if the price of crude was now headed down for the foreseeable future. “If the devastation of New Orleans and the closing of oil refineries across the Gulf of Mexico wasn’t enough to spur crude oil prices much past $70 a barrel, you have to wonder what else could be,” opines MarketWatch.com’s David Callaway today.
Perhaps, although gasoline prices continued rising today. Coming after yesterday’s huge gains, it’s clear that the bulls aren’t giving ground in trading pits for gasoline. As such, Joe Sixpack and his friends are about to learn a valuable, albeit painful lesson in the business of energy refining. Lesson one: crude oil and gasoline are related, but they also have the capacity to move independently of one another. Such a moment of independence has arrived. The reason is simple: gasoline is a manufactured product; oil is a naturally occurring commodity. With refinery capacity taking a hit, the only rationale response is to bid prices up.
It’s any one’s guess what the impact all of this will have on the U.S. economy, but it doesn’t take a genius to realize that the implications are less than encouraging. Gasoline, dare we say, is a strategic commodity in America–more so than even crude oil. Exactly how much pain soaring gasoline prices will shave from GDP won’t be known for some time. Indeed, it’s a long way till the release of the first estimate of third-quarter GDP. Maybe the waiting list for a Prius isn’t so long after all.