Sandy Aftermath: Death, Destruction, Power Outages, High Gas Prices
JERSEY CITY, N.J. -- As remnants of Hurricane Sandy move into south central Pennsylvania, the storm, now classified as a post-tropical storm, leaves behind stark images of one of the worst natural disasters to hit the east coast of the United States:
- Rail cars that floated onto the New Jersey Turnpike.
- A house in the middle of Route 35 in New Jersey.
- A collapsed crane dangling tons of steel and cable 65 floors above the streets of Midtown Manhattan.
- Two to Three feet of snow in West Virginia.
- Huge swaths of New York and New Jersey ordered to evacuate leaving behind deserted Atlantic City casinos, Wall Street and other flooded coastal areas.
- At least 17 deaths have been reported and nearly five million households were without power this morning as superstorm Sandy slowly marched inland.
The nation's financial heart in Lower Manhattan was shuttered for a second day and seawater was cascading into the still-gaping construction pit at the World Trade Center as well as the city's 100-year-old subway system, affecting every transit line.
According to the Associated Press, the storm that made landfall in New Jersey on Monday evening with 80 mph sustained winds killed at least 17 people in seven states, cut power to more than 7.4 million homes and businesses from the Carolinas to Ohio, and caused scares at two nuclear power plants.
Authorities launched an effort to evacuate about 800 people in the town of Moonachie in northern New Jersey early Tuesday after a berm overflowed, authorities said.
The massive storm reached well into the Midwest as well, as Chicago officials warned residents to stay away from Lake Michigan as winds of up to 60 miles per hour and waves exceeding 24 feet were expected well into Wednesday.
The storm is expected to continue northward into Canada over the next few days.
As usual in advance of a natural disaster, New Jersey Gov. Chris Christie reminded fuel marketers that price gouging is illegal during a state of emergency and that offenders will be prosecuted. Merchants found in violation of the price gouging law are subject to civil penalties of up to $10,000 for the first offense and $20,000 for subsequent offenses.
On a CNBC report yesterday, NACS' vice president of government relations, John Eichberger, weighed in on the storm's impact on fuel supply and price gouging. Eichberger explained that prices will typically rise in advance of a storm and that gas stations' fuel inventories "get drained." In response, dealers will start raising prices to cover the price of the next gallon they have to buy.
"Our suggestion [for retailers] is when you are making pricing decisions especially during emergencies, don't change the criteria with which you make your decisions," said Eichberger on the CNBC report. "If you are accused later and you have a consistent pattern by which you have made pricing decisions, you will be protected from a legal attack."
Eichberger added that final pricing decisions incorporate a number of factors, including supply, demand, and other industry events, including those affecting distribution. "Pricing decisions are so complicated because not only do you have refinery outages, if you have power outages, you may have terminals out."
The storm pounded oil refineries along the East Coast in Delaware, New Jersey and Pennsylvania, causing many to shut down temporarily, according to a CNNMoney report. Gas prices are expected to spike over the next few days, even though some experts way they should drop back quickly due to lessened demand.
The region's largest refinery, which is run by Philadelphia Energy Solutions and processes 330,000 barrels of oil a day, was reportedly running at reduced rates.
Among those shut down were the region's second largest, Phillips 66's Bayway Refinery in Linden, N.J., which processes 238,000 barrels of oil per day. Refineries operated by Hess, NuStar and others have also shut down entirely.
Prices would spike if the refineries are forced to remain offline for several days because refinery capacity in the Northeast has already been reduced by facility closings over the past few years.
"We don't have the fallback we had during Hurricane Katrina," Stephen Schork, editor of The Schork Report, a daily research letter on the energy markets, told CNNMoney. "If we see a one-week delay in output, the good times might be over."
An extended delay to refinery production in the Northeast could push the national average price of regular, unleaded gasoline from $3.54 on Monday to $4, according to Rich Sherman, a supply chain expert with Trissential.
On CNBC segment, energy analyst Matt Smith also addressed Sandy's potential impact on refineries. "It's a huge concern," Smith said. "Refining utilization in the northeast makes up 7 percent of the total of the U.S. The three refineries in New Jersey, 240,000 barrels a day is already shutting down and the other two are cutting back on rates and so that's really why we're seeing gasoline prices spike up."
When asked about the impact of a longer power outage, Smith relayed a sobering forecast.
"If we do see power outages, that would knock refining for perhaps a week," he said.
However, any spike in prices could be dampened by a pullback in consumer demand, said Tom Kloza, chief analyst at the Oil Price Information Service, which compiles prices for AAA.
Kloza noted that in a typical week, the nation's drivers use about 60 million barrels of gasoline. The analyst said he expects that to drop temporarily to 55 million barrels.
"My read is that this storm is going to be one of the biggest demand destroyers in my lifetime. It's destroying a lot of demand for jet fuel, for gasoline, for diesel," he said.