Virginians noticing higher gas prices during Labor Day weekend can blame Hurricane Isaac’s visit to the Gulf Coast last week. Average prices in Charlottesville during the weekend rose as high as $3.61 per gallon, 18 cents above what is normal for the area.
The fallout from Hurricane Isaac could slow the production and transportation of fuel, said Jerry Stenger, director of the climatology office at the University.
Though the extreme weather remained confined to the Gulf Coast, the storm’s severity, combined with a higher demand for gas to meet increased travel needs during Labor Day weekend, led to an increase in gas prices.
“Major thoroughfares—supply lines that transport goods—were disrupted,” said Donald Boudreaux, professor of economics at George Mason University. “Demand for gas also rises because of people’s uncertainty. They are hedging their bets and stocking up.”
Increased fuel costs also affect the price of other goods in industries that rely on petroleum.
“We typically see, in an immediate aftermath from hurricanes, price increases for staple goods—they spike up because demand increases as supply decreases,“ Boudreaux said.
National companies are able to absorb the cost of these fuel hikes, keeping prices artificially low until the fuel industry rebounds.
But small businesses will bear the brunt of the price hikes as they are often less able to effectively absorb increased costs.
“A lot of small businesses, Mom and Pops, don’t have the capital to keep their prices low,” Boudreaux said. “They lose a lot of the flow of supply and are taking huge losses on that end.”
Meteorological reports suggest the country hasn’t seen the last of this year’s extreme weather or its far-reaching impacts to industry. Twelve storms have already battered the U.S. coast this hurricane season.
“Hurricane Isaac is probably the most significant tropical system in the Atlantic this season,” Stenger said. “But that storm barely reached hurricane strength.”
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