By Zack Colman - 11/01/12 08:01 PM EDT
Despite long lines at gas stations in New Jersey, Hurricane Sandy is likely to drive gas prices lower for Election Day.
Analysts expect the storm will drive gas prices lower than pre-storm estimates for the rest of the year due to "demand destruction."
Put simply, the storm hit gas consumers, not producers, and will take an enormous amount of gasoline consumption offline.
“The storm hit in an area with major gasoline consumers rather than gasoline producers,” said Ash. Hurricane Katrina, in contrast, shut down major Gulf Coast refineries in 2005.
Regular unleaded fuel dropped about 2 cents Thursday to $3.50 per gallon nationally, according to AAA. In New York and New Jersey, gas cost $3.92 and $3.54 per gallon, respectively.
Analysts said the electricity shortage — not a gasoline supply crunch — is the cause of long lines at New Jersey and New York gas pumps.
“While the lines they show on TV might look a lot like the ones in the 1970s, this is not a gas shortage. This is an electricity shortage,” Ash said.
Nearly 3.4 million customers in New York and New Jersey are still without power, according to the Energy Department.
That has taken between 1 and 2 million barrels per day of gasoline consumption offline, Ash said. Before the storm, people in the two states used about 8.6 million barrels of gasoline per day. The reduced East Coast demand also has created a glut of Midwest and Gulf oil, keeping prices lower in those regions, he said.
On top of that, the East Coast's 1.1 million per day refining capacity hasn't been slowed much by the storm.
The reason for the lines?
Many gas stations have lost power and can't provide gas. The East Coast gasoline distribution system also has taken a hit, meaning gasoline stations still with power are starting to run out of supplies, analysts said.
Nearly half of East Coast gasoline shipping terminals lacked power Thursday, which trapped supplies. And while filling stations are falling short on gas, analysts said that would not affect prices.
“The issue that we have is not so much of supply, but of distribution because major oil terminals in the New York harbor are out of power,” Andrew Lipow, president of Houston-based Lipow Oil Associates LLC, told The Hill.
Still, gasoline stations may face a long restart, Ash said.
The Department of Energy says 17 percent of New York and 45 percent of New Jersey customers remained in the dark as of Thursday. And many gas stations were closed Thursday because they lacked power.
That is less of a problem for people who can drive to Connecticut, where Sandy affected fewer communities and gas stations, Ash said.
But for those living on Long Island, where only 30 percent of gas stations were operating Thursday, residents will have to wait until electric utilities restore electricity, Ash said.