Within days after Hurricane Katrina hit the Gulf Coast a year ago, gas prices went over $3.15 for regular and the cost of heating oil spiked, hitting an all-time high of $2.56 a gallon by Oct. 3.

Natural gas prices also shot up, thanks to the double whammy of Katrina and Hurricane Rita three weeks later and that, in turn, affected the price of electricity since so many generating plants are fueled by natural gas.

The price of natural gas has come back down a bit and so too the price of electricity on the wholesale market, but real relief on energy prices is hard to come by.

The drop in natural gas prices in 2006 is expected to be negated by increases in 2007, and heating oil and gasoline prices continue to track with the price of crude – now at $70 a barrel.

The price for regular gas was $2.58 the day before the hurricane hit in 2005. On Monday the average price for regular “dropped” to $2.89 from $2.95 the day before.

The price of home heating oil also has steadily risen after dropping from the hurricane spike. The latest statewide average is $2.46 per gallon, which is 10 cents higher than the average for last year’s heating season. The Maine State Planning Office is predicting this year’s season will average out to about $2.43 per gallon.

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“In real numbers, we’re still not where we were in 1980, but we’re getting close,” said Beth Nagusky, the governor’s director of energy independence and security.

Nagusky was referring to the highest price to date paid for heating oil in Maine – adjusted for inflation – that came on the tail end of the OPEC oil embargo of the 1970s. The actual price per gallon in 1980 was $1.39, which adjusted for inflation would be $2.97 today.

“The market is so tight that anything now can drive prices up and up significantly,” Nagusky warned the Legislature’s Appropriations Committee last week.

Jamie Py, head of the Maine Oil Dealers Association, which represents gas stations operators and fuel oil companies, said natural disasters like hurricanes or line breaks can cause spikes in prices, but the real driver is supply and demand.

“The key for people to understand is 90 percent of the increase in the retail price can be directly attributed to increases in the crude price,” Py said, and that is largely driven by greater worldwide demand. “Everybody’s looking for the same product, and you have booming economies in the U.S, China and India.”

He said a basic rule of thumb is the price of gasoline goes up five cents for every dollar increase in the price of crude oil.

Hurricanes or even the threat of one can make the price spike or even go down if a storm changes its path. When Tropical Storm Ernesto changed its path on Monday, gasoline prices dropped.

Katrina caused a spike last year, Py said, but the rising price of crude, from $50 a barrel last year to $70 today is what’s really driving prices, and right now “it’s just going up and up and up.”


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