Katrina comes at a very bad time for US gasoline markets. Supplies are already tight, and now a substantial amount of US oil production and refining capacity are shut in, for an unknown period of time. Long ago, I worked as an engineer in a refinery and it can take days to get everything restarted from a cold start. The result will almost certainly be near-term gas shortages.
There are two ways this can play out: 1) a short term spike in prices, as much as a dollar or more a gallon or 2) long and irritating gas lines. Lets hope that prices are allowed to reach their level and gas lines can be avoided, but who knows what political stupidities (ala Hawaii) will be proposed.
I really, really hate gas lines. I hate the uncertainty of whether or not I can find a station open. I hate refilling my tank every day to make sure I am not caught short. And for those of you who say I am arrogant since I can afford higher prices but the poor cannot, I assure you that folks who are paid by the hour are hurt much worse waiting around for hours in gas lines than the mere irritation I encounter. More on gas line expectations as a semi-self-fulfilling prophecy here.
PS- Expect to see news of a refinery fire or explosion over the next week. The risk of accidents is very high when these complex plants have to start up -- they weren't really meant to be turned on and off.
Update: First signs of a gas shortage?
Update #2: The Mises Blog has a roundup of economics posts supporting price spikes during spot shortages (popularly known as gouging).
Update #3: Jane Galt has more in praise of price gouging