It was like a scene out of the seventies. Americans lined in their cars all over the Southeast hoping that their local filling station would have gasoline. There were documented reports of shortages as far away as the Dakotas. This wasn’t typical behavior, fortunately, so it couldn’t have been too much like the oil embargo era. Instead, in early September 2005, the blame fell on Mother Nature rather than OPEC.
Hurricane Katrina was a total disaster. What happened in and around New Orleans was a national tragedy. And the storm kept going. In its path people were rushed into emergency situations, which, if you’ve ever been in an area when a hurricane hits, means filling up every spare can and car with motor fuel.
The disruption in energy was of such a scale that for only the second time the President had ordered a drawdown from the Strategic Petroleum Reserve (the first time was in advance of Desert Storm in 1991). On September 6, 2005, the Department of Energy issued a Notice of Sale for 30 million barrels, 15 million each of the sweet and sour variety.
According to the Bureau of Labor Statistics (BLS), Hurricane Katrina’s strain on gasoline production and supply caused a 56.5% year-over-year rise in the Motor Fuel component of the CPI for that month. Not all of that huge, painful increase was due to the storm as oil prices were rising throughout the period. Still, it was one month where the price of gasoline and the price of crude reversed positions.
If you look at the BLS’s consumer price basket for its average urban consumer, which is what the CPI is based upon, you won’t find crude oil in it anywhere. Why would you? The average American city dweller isn’t bidding electronically on NYMEX for pipeline access and storage capabilities. They only use the end product and not all that much.
Within the CPI basket, the “relative importance” of motor fuels to that average citizen is only 4.437% (as of September 2018). Total energy, which includes filling up your car, is but 8% of the total index. So, despite the fact that crude prices aren’t included in the CPI and gasoline is only about 4% of the overall basket, still, the headline index follows closely along from WTI’s trend anyway.
