Published: August 28, 2008 04:00 pm      

4 p.m. Gas prices increase; attorney general warns of gouging

Gustav likely to push up gas prices for Labor Day



staff and wire reports



You better gas up.



As Tropical Storm Gustav swirls toward the Gulf of Mexico on a path that could disrupt energy production — and Labor Day weekend looms — gas prices are headed up. In Meridian, prices have risen about 10 cents a gallon at most stations in less than 24 hours. That trend is likely to continue, officials said.

Any damage to oil and gas facilities — especially along the vulnerable Gulf Coast — could send retail gas prices spiking back above $4 a gallon, analysts say.

In an attempt to deter price gouging, Mississippi Gulf Coast, Attorney General Jim Hood sent out a fleet of investigators to check prices today in order to determine if prices for fuel, generators, building supplies and other necessities are raised after a state of emergency is declared. General Hood cautioned merchants that once a state of emergency is declared, they may not increase their profits. Gov. Haley Barbour issued declared a state of emergency in the early afternoon.

Hood said: "we are already getting call from consumers that fuel has increased in some places by as much as $.25 per gallon

yesterday in anticipation of the state of emergency being declared."

"Our office is sending written warnings to all hotels, fuel retailers and suppliers, and building supply houses that

once a state of emergency is declared they cannot increase their profits," Hood said. "If they are making $.10 per gallon before the state of

emergency is declared, then they cannot increase that profit margin. If, however, the price per gallon of a load of fuel goes up $.25 per

gallon, then the merchant may charge $.25 more per gallon. Yet merchants may not increase their prices in anticipation of additional

costs to replenish the item."







Fears about the storm pushed crude oil above $120 a barrel Thursday, but prices later fell into negative territory as traders bet the government will tap the Strategic Petroleum Reserve if supplies are threatened.



Regardless of where the storm hits though, gas prices look to be headed higher.



"Prices are going to go up pretty soon. You're going to see increases by 5, 10, 15 cents a gallon," said Tom Kloza, publisher and chief analyst at the Oil Price Information Service in Wall, N.J.



That's because supply worries over Gustav have pushed wholesale gas prices up nearly 40 percent along the Gulf in the last few days, meaning struggling filling stations ’ even those far away from states like Louisiana and Texas ’ will have little choice but to pass on the costs by ratcheting up prices at least temporarily.



Gas prices have dropped steadily over the last month as crude has eased from record levels. A gallon of regular gas shed about half a penny overnight to a new national average of $3.66 ’ 11 percent off the all-time high of $4.114 a gallon reached last month.



But if Gustav does major damage to supplies, consumers could see that record shattered.



"If we have a Katrina-type event, you're talking about gas prices going up another 30 percent," said Kloza, whose firm tracks U.S. gas prices by surveying thousands retail outlets around the nation.



Gustav, approaching Jamaica with winds near 70 mph, could regain hurricane strength later Thursday and possibly enter the Gulf of Mexico ’ home of a quarter of U.S. crude production ’ as a dangerous Category 3 storm early next week.



Oil companies raced to remove workers from oil and gas platforms and braced structures for withering rain and wind.



The concerns pushed light, sweet crude for October delivery as high as $120.50 a barrel on the New York Mercantile Exchange, but prices later settled $2.56 lower at $115.59.



The whipsaw session was exacerbated by low-volume trading heading into the holiday weekend.



Still, oil's retreat in the face of a possibly dangerous storm surprised some oil market watchers, who attributed the move to speculation that the government could release supplies from the Strategic Petroleum Reserve to counter any drop in production from Gustav. The International Energy Agency said the 27-member body was prepared to tap its emergency stocks if needed.



"I think that's taking some of the steam out of this rally," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill.



Oil was also being pressured by a government report showing that U.S. natural gas supplies jumped much more than expected last week because of weak demand, sending prices for the fuel plummeting.



Natural gas for October delivery fell 55.8 cents to settle at $8.05 per 1,000 cubic feet.



Associated Press Business Writer STEVENSON JACOBS contributed to this report.