Severe fuel shortage grips parts of southeast

ATLANTA (Reuters) - A severe fuel shortage has gripped parts of the southeastern United States, causing long lines at filling stations and symbolizing for some people their fears about the wider economy.

The shortage began two weeks ago in Atlanta, the region's largest city, when oil refineries on the Gulf Coast were shut down by hurricanes Gustav and Ike earlier this month. Parts of north Georgia, western North Carolina and parts of Tennessee were also affected.

The effects on motorists have been dramatic. Most service stations in Atlanta are out of gas, with plastic bags placed over the pumps or signs saying "out".

As a result, drivers are cruising the city hunting for gas -- often with a fuel meter needle hovering close to empty. When they find gas, it's often above $4 a gallon.

Traffic is lighter on the city's streets and highways as some residents share rides and limit their journeys.

Lines and elaborate queuing systems have developed at gas stations on days when oil companies deliver fuel. Motorists report showing up at gas stations before dawn to beat the line only to find dozens of cars ahead of them.

"It's been very tough," said Rhonda Forrest, 45, who said she slipped out of work on Monday to fill up her tank when she learned that a gas station in the city's upmarket Buckhead district was open.

The shortage has also had a psychological impact. Like many U.S. cities, Atlanta is car dependent and residents say they had until now taken refueling for granted.

Some motorists said in interviews the lack of fuel was simply an inconvenience. Others said that while they understood that the shortage was a supply issue, it was hard not to connect it to problems in the wider economy.

U.S. lawmakers rejected a $700 billion bailout plan for the financial industry on Monday in a shocking vote that sent global stock markets sliding.

ECONOMIC BLOWS

It was the latest blow to the U.S. economy that has seen a credit crunch and a string of bank failures in recent weeks as well as a year-long wave of home foreclosures.

"When bad things happen in clusters, human nature says things are really going down, said Joe Dudar, 44, as he filled up his tank.

"The rational side says that this (the gas shortage) is not related to the bank failures. But at the same time two (problems) at the same time can make for a real bad day," he said.

Some Atlanta residents said the impact of the shortage is increased because it affects the entire city at once, whereas other economic problems such as home foreclosures affect either individuals or specific communities.

"It's a little scary. It's concerning. You see how fragile our whole world and economy is and how reliant we are (on oil)," Stuart Canzeri, 39, a financial planner.

A free market can address a shortage in a number of ways, including raising prices to curb demand and increasing supply, according to Hashem Dezhbakhsh, professor of economics at Emory University.

The average price of a gallon of gas rose to $4.14 from $3.75 two weeks ago in the Southeast, according to a survey of gas stations on Sunday by prominent industry analyst Trilby Lundberg.

She said prices should fall again once supply increases but the shortage could persist for another week.

In an effort to bridge the gap in the supply chain, Georgia Gov. Sonny Perdue asked President George W. Bush on Monday to consider releasing crude oil from the strategic petroleum reserve to refineries in the Gulf.

This came on top of a decision by the U.S. Environmental Protection Agency last week to loosen restrictions on fuel sulfur content as another measure aimed at increasing supply.

But the shortage was also driving up demand as nervous motorists buy more gas than usual.

In one indication of the trend, a motorist at one gas station filled not only his tank but also a tin can and a one gallon milk bottle just to be certain he would not run out.

"We can't control the (consumer) feeding frenzy. You can say don't top off your fuel and set limits but people will do it anyway," said Chuck Allen, who manages a full-service Shell station in Atlanta.

"People are panicky. It's a herd mentality," Allen said.

(Editing by Jim Loney and Philip Barbara)