GASOLINE prices jumped to unprecedented levels in the wholesale markets yesterday as Hurricane Ike tore across the Gulf of Mexico, threatening to strike Texas and its refineries.

But despite the growing worries about Ike, funds continued to liquidate their investments in crude, anticipating a slower global economy and a stronger US dollar.

Light, sweet crude for October delivery fell US$1.71 to settle at US$100.87 a barrel on the New York Mercantile Exchange, after dropping as low as US$100.10 a barrel. The contract settled Wednesday at US$102.58, the lowest close since April 1.

The last time Nymex crude traded below the US$100 mark was April 2.

In London, Brent crude on the ICE Futures exchange fell US$1.33 to US$97.64 a barrel.

The wholesale price of gasoline ranged from US$4 to nearly US$5 a gallon at the US Gulf Coast yesterday, said Tom Kloza, publisher and chief oil analyst of the Oil Price Information Service in Wall, New Jersey. That is up significantly from about US$3 to US$3.30 a gallon on Wednesday, Kloza said.

'We're looking at the highest wholesale prices ever for a huge swath of the country,' he said. 'People understand that regardless of what happens with Ike, it's going to shut down the biggest refining cluster for a period of five, six, seven days.'

The wholesale price of gasoline is what refineries charge retailers. Retailers then mark up those prices for the customer so they can make a profit, so if these wholesale prices hold, it could mean that pump prices for US drivers easily break through the July 17 record of US$4.114 a gallon (US$1.08 a liter).

The average US retail price for gasoline was at US$3.671 a gallon (97 cents a liter) yesterday, according to the Oil Price Information Service, auto club AAA and Wright Express.

October gasoline futures rose 8.72 cents to settle at US$2.7488 a gallon on the New York Mercantile Exchange.






The market's renewed storm worries arrive a day after the US Energy Department reported a larger-than-expected drop in crude and gasoline inventories, and OPEC decided to cut excess production by about half a million barrels a day.

'It's a strange, strange world here,' Kloza said. 'You might see an extraordinary thing, you may see crude oil less than US$100 and retail gasoline more than US$4 a gallon.'

Ike, following last week's Hurricane Gustav, was expected to blow ashore early Saturday somewhere between Corpus Christi and Houston. Some forecasters predict it will strengthen from a Category 2 storm, with winds near 100 mph (160 kph), to a Category 4. Ike ripped through Cuba and killed at least 80 people in the Caribbean.

Texas is home to 26 refineries that account for one-fourth of US refining capacity, and most are clustered along the Gulf Coast in such places as Houston, Port Arthur and Corpus Christi. Exxon Mobil Corps plant in Baytown, outside Houston, is the largest US refinery.

Refineries are built to withstand high winds, but flooding can disrupt operations and, as happened in Louisiana after Gustav, power outages can shut down equipment for days or weeks.

The big question, however, is whether a possible disruption in gasoline distribution, not to mention the slow economy, would crimp demand and drive gasoline prices back down again.

'This could end up looking just like Katrina, whereby prices spiked substantially and came down just as hard,' said Linda Rafield, senior oil analyst for Platts, the energy research arm of McGraw-Hill Cos.

When Hurricanes Katrina and Rita scoured the Gulf Coast back in 2005, she said, 'the US economy was in the mature phase of a business expansion.' Now, the US economy is slowing, so demand could suffer even more.






A decision Wednesday by the Organization of Petroleum Exporting Countries to reduce output by 520,000 barrels a day failed to boost oil prices, which have fallen 30 percent since reaching a record US$147.27 on July 11 on concerns slowing global economic growth will undermine demand for crude.

'OPEC was trying to slow this steep decline,' said Mark Pervan, senior commodity strategist with ANZ Bank in Melbourne. 'But we're in a bearish trend right now and I still expect the price to fall another US$10.'

Trader and analyst Stephen Schork suggested prices could fall even lower, to US$75, 'which is exactly where oil was last September.'

Evidence of falling US crude inventories, which normally push prices higher, also failed to stop yesterday's decline. The Energy Department's Energy Information Administration said Wednesday that crude inventories fell by 5.9 million barrels last week compared to the previous week, and that gasoline inventories fell by 6.5 million barrels. The EIA also reported, however, that inventories of distillates, which include heating oil and diesel fuel, fell by a lower-than-anticipated 1.2 million barrels.

In other Nymex trading, heating oil futures rose 1.31 cent to settle at US$2.9155 a gallon. Natural gas fell 14.5 cents to settle at US$7.248 per 1,000 cubic feet. The EIA said yesterday that natural gas in US storage rose last week.

CME Group, parent of the New York Mercantile Exchange, will open energy trading on the CME Globex and ClearPort platforms earlier than usual Sunday at 10:00 a.m. Eastern time (1400 GMT) due to the hurricane.