Ike drives gas prices, but oil only inches ahead

Oil futures edged up Friday morning as Hurricane Ike headed for Texas, but wholesale gas prices moved much more dramatically because refineries in the state were closed.

Oil futures edged up Friday as Hurricane Ike headed for Texas, but wholesale gasoline prices moved much more dramatically because refineries in the state were already closed ahead of the storm's landfall, expected late Friday or early Saturday.

Oil futures closed up 31 cents US to $101.18 a barrel on the New York Mercantile Exchange after dipping to $99.99, the first time the price has fallen below $100 since April.

But U.S. wholesale gas prices jumped 30 per cent Thursday in response to the refinery shutdowns. The price hit $4.85 a gallon (about $1.28 a litre) in the Gulf Coast market.

Along the Gulf Coast, home to about a fifth of U.S. refinery capacity, Exxon Mobil Corp., Valero Energy Corp., ConocoPhillips, Marathon Oil Co. and others halted operations because of the approaching storm.

"Ike is headed into the heart of the refining industry,'' energy expert Bruce Bullock from Southern Methodist University in Dallas told Bloomberg News. "The damage is likely to come in flooding, a lack of power for an extended period of time.''

The U.S. National Hurricane Center warned Friday that Ike could bring storm surge waves of more than six metres above the normal tide level, with "large and dangerous battering waves."

If not for the hurricane season, oil would be trading at less than $100 a barrel, said Tetsu Emori, a commodity  fund manager with ASTMAZ Futures Co. in Tokyo.

"Oil demand on a global basis is quite pessimistic," he said.

With files from the Associated Press