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Israeli company Dor Energy, the sole supplier of gasoline and cooking gas to the Palestinian territories, cut off all deliveries on Wednesday, citing US$27 million in unpaid bills.

Mujahed Salameh, director general of the Palestinian Petroleum Agency, predicted an "economic catastrophe" which would cripple factories and transportation as many people would be unable to work.  

He said that the Palestinian Authority does not maintain petroleum reserves and that gasoline supplies would run out in many areas by Thursday.  The Associated Press reported long lines at gas stations in the Gaza Strip, and gasoline stations through the West Bank have begun rationing.

Dor Energy had threatened supply cutoffs twice before 2006, which were averted when the Palestinians made last-minute payments.

Palestinian President Mahmoud Abbas is reportedly in talks with U.S. and European Union officials in an attempt to get Israel to resume delivery of fuel.  For Israel's part, a spokesman for Prime Minister Ehud Olmert said that the Israeli government would "absolutely not" bail out the Palestinians.

The gasoline shortage is expected to deepen an economic and humanitarian crisis in the Palestianian territories since the U.S. and EU cut off aid to the Palestinian Authority after Hamas won parliamentary elections.