Oil and Gas

Hurricane Irma pushes gasoline prices to highest increase since Katrina

Key Points
  • Retail gasoline prices surged 25 cents in the week that ended on Tuesday, the biggest gain since 2005's Hurricane Katrina.
  • The surge is not expected to last because the energy industry is likely to recover quickly.
Gas stations experiencing long lines ahead of Irma

The pain at the pump is beginning to spread as Hurricane Irma is set to lash Florida this weekend.

Retail gasoline prices surged 25 cents in the week that ended on Tuesday, the biggest gain since 2005, when Hurricane Katrina stomped through the Gulf Coast, according to GasBuddy, which tracks the prices consumers pay to fill up.

That surge came before Irma, which is setting up to be the costliest and most ferocious storm in U.S. history. The Category 4 hurricane is set to make landfall by Sunday in Florida.

While the human toll the storm is likely to exact dwarfs the gas price jump, consumers not only in the storm's path but also up the East Coast will feel effects.

"Every state has seen average gas prices rise, and Texas saw shortages at hundreds of stations. It's been one of the most challenging weeks faced in years," Patrick DeHaan, senior petroleum analyst for GasBuddy, said earlier this week about Harvey's impact.

From a market perspective, gasoline futures have been volatile through the early stages of hurricane season.

New York RBOB gasoline jumped nearly 35 percent from Aug. 21 and 31, then turned lower in September and was flat in Friday trade. Prices at the pump, though continue to rise, as the chart of national gas prices shows:

Source: GasBuddy

Experts believe the market will continue to be sensitive to the storm damage and its effects on refineries and supplies. While Harvey spared the Houston-area oil infrastructure any lasting damage, Irma may not be as charitable.

"Out of the frying pan, into the fire," said Stephen Schork, founder and editor of the Schork Report, which focuses on energy commodity market trends. "Irma presents a different challenge for the industry."

That's because Florida is "an island unto itself" when it comes to gasoline shipments, with its four ports dependent on shipments from the Gulf Coast. Irma's path currently indicates that at least three of those ports will be disabled, Schork said.

"Those ports are going to get slammed. You're going to see extreme dislocations in vessel traffic," he added.

It's no wonder, then, that the market is reacting with higher prices at the pump, and not just in Florida. Nationally, the most recent average price is $2.67 a gallon, or 31 cents higher than a month ago, according to GasBuddy. However, locally prices are higher.

Gas prices sore to almost $4 a gallon in Fort Lauderdale as Hurricane Irma approaches the Florida coast.
Jodi Gralnick | CNBC

Florida's average is $2.72, up 14 cents from last week and 44 cents from a month ago. Georgia has jumped to $2.73 a gallon, up nearly 53 cents from last month. As far away as New York, the current price of $2.82 a gallon is 35 cents higher than a month ago.

The good news for gasoline prices: The surge is not expected to last.

"The spikes will be short-lived given that the industry has learned its lessons of the past 20 years," said Schork, who estimated that the price pop would last "weeks."

In terms of overall consequences, few on Wall Street expect the storms to have a lasting effect either on the economy generally or long-term inflation expectations more specifically.

"I don't see any significant shortages longer term that augur for oil prices to go up past $50 a barrel or a sustained hike at the pump for consumers," said Joe Quinlan, chief market strategist at U.S. Trust, Bank of America Private Wealth Management. "This is temporary, and it's going to be treated that way in the markets."

WATCH: A look at how evacuation efforts are going in Florida.

Florida evacuees hit the road ahead of Irma and 'hope for the best'