Energy traders' fears are rising right along with the flood levels along the Mississippi River.
Oil is firmly back above $100 a barrel and gasoline futures surged over 6% Monday on concerns about the potential impact of flooding on the largest gasoline pipeline in the U.S. as well as nearly a dozen Gulf Coast refiners.
"The potential for flooding is just one more issue in a series of things that have befallen the gasoline market," says Houston-based energy analyst Andy Lipow of Lipow Oil Associates.
Rising river waters are fueling concerns about U.S. gasoline production after a series of refinery outages in Texas and the East Coast over the last several weeks.
Analysts say a fire at a 330,000 barrel per day Chevron refinery in Pascagoula, Miss., and unplanned repairs on a key crude oil pipeline in the Midwest today also contributed to a surge in gasoline prices.
Still, most traders' remain focused on the Mississippi. River flows are expected to crest in the Memphis area tonight or tomorrow, but have not had an impact on local refineries.
Valero's 180,000 barrel per day refinery in Memphis has seen "no material impact to production," says Bill Day, a company spokesman.
He adds that no interruptions are expected there or at its 250,000 barrel per day refinery in St Charles, La., either.
But traders aren't taking chances. Gasoline inventories are already 9% lower than they were a year ago and nearly 4% lower than they were at this point in 2008, while demand historically picks up before Memorial Day.