(Bloomberg) -- U.S. drivers preparing for summer’s last holiday weekend were greeted with the largest one-day gasoline price jump in more than a decade on Thursday, all thanks to Hurricane Harvey.
The average U.S. price for regular gasoline at the pump rose 7 cents Thursday to $2.519 a gallon, the steepest single-day increase since April 5, 2007, according to data from AAA, the largest U.S. motoring group. Harvey, which made landfall twice along the U.S. Gulf Coast, bringing torrential rains and floods, shut pipelines and took 4.15 million barrels a day, or 22 percent, of U.S. refining capacity offline, data compiled by Bloomberg show.
“Right now, we’re in the middle of what we’re calling a perfect storm,” Jeanette Casselano, a spokeswoman for AAA, said by telephone. Harvey is “reducing flow from pipelines as well as shutting down some refineries, which is in turn tightening gasoline supplies. In addition to that, we traditionally see gas prices increase at the end of August going into Labor Day, as it’s the last big weekend of the summer.”
Major fuel arteries, including Colonial Pipeline Co., are struggling to find enough fuel for the Eastern Seaboard because of supply disruptions from Harvey, which has also taken at least 46 lives and damaged 100,000 homes. Fuel has grown scarce in cities like Dallas, where motorists spent hours in lines at some gasoline stations on Thursday and Friday.
The federal government has taken steps to provide some relief.
The Energy Department has agreed to release 4.5 million barrels of crude oil from the country’s Strategic Petroleum Reserve since Thursday, including 1 million barrels bound for the Phillips 66 refinery in Lake Charles, Louisiana. The U.S. Environmental Protection Agency authorized 38 states and the District of Columbia to switch to winter-grade fuel two weeks early so gasoline stockpiled for the end of summer is free to go to market. Valero Energy Corp., the biggest independent refiner in the U.S., is seeking help from the State of Texas to ship more fuel to the East Coast via Colonial.
The U.S. Labor Day holiday, which falls on Sept. 4 this year, is popularly considered to mark the end of summer, and fuel demand typically drops as Americans return to work and school, pressuring prices.
Retail gasoline prices have risen by 17 cents a gallon since Aug. 25, the day Harvey first made landfall, and the motor fuel is likely to extend its rally, according to an AAA forecast.
“We do expect gas prices to continue increasing upwards of 10 to 20 cents,” Casselano said. “But by mid-September, we believe prices will start to drop and alleviate some of the pressure on consumers’ wallets.”