Business - USA TODAY
Low supply sends gas ever higher
Tue Aug 19, 6:21 AM ET
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By James R. Healey, USA TODAY
Gasoline prices are poised to set records in the next few weeks.
The reasons include, but go well beyond, last week's blackout in the Northeast. The power outage disrupted production of 500,000 barrels of gas a day at four U.S. and four Canadian refineries, according to the Oil Price Information Service (OPIS). That's a loss of roughly 5% of the 9.2 million barrels of gas U.S. drivers use daily.
A gallon of regular averages $1.627 nationwide, the Energy Information Administration reported Monday. That could jump 10 to 15 cents, the EIA and industry analysts say, tying or breaking the record $1.728 set in mid-March.
Fires, breakdowns and storm damage at California refineries in July and earlier this month already had begun boosting prices nationwide. West Coast gas distributors, nervous about supplies, are paying record wholesale prices.
"When wholesale gas is $1.50 or $1.60 on the West Coast, and you've got a boatload on the water heading somewhere that pays less, you say, 'Well, I can afford the tariff to turn around and go through the Panama Canal' " and sell the gas in California, says Tom Kloza, an analyst at OPIS.
One of two pipelines serving Phoenix broke earlier this month, boosting prices there and siphoning more gas from regions where wholesale prices are lower. "Conditions are so tight that any change affects the whole market," says John Felmy, chief economist at the American Petroleum Institute.
Also pushing gas prices up:
Strong demand. Summer is driving season. Coincidentally, the EIA says, gasoline inventories are their lowest since November.
Pent-up price increases. Retailers need a nickel a gallon just to catch up with earlier wholesale price increases, Felmy says. They'd need to add a dime or so to recoup higher prices resulting from the blackout and West Coast shortages. "Gasoline retailers may get accused of price gouging as they attempt to pass on costs that have been percolating since the first day of summer," Kloza notes.
Political turmoil. Oil supplies are threatened by attacks in Iraq (news - web sites) and violence in Nigeria. High prices provoked selling Monday. West Texas Intermediate crude oil for September delivery was $30.89 a barrel, down 16 cents. Wholesale gasoline was $98.91 a gallon, down 1.13 cents.
Low supply sends gas ever higher
Tue Aug 19, 6:21 AM ET
Add Business - USA TODAY to My Yahoo!
By James R. Healey, USA TODAY
Gasoline prices are poised to set records in the next few weeks.
The reasons include, but go well beyond, last week's blackout in the Northeast. The power outage disrupted production of 500,000 barrels of gas a day at four U.S. and four Canadian refineries, according to the Oil Price Information Service (OPIS). That's a loss of roughly 5% of the 9.2 million barrels of gas U.S. drivers use daily.
A gallon of regular averages $1.627 nationwide, the Energy Information Administration reported Monday. That could jump 10 to 15 cents, the EIA and industry analysts say, tying or breaking the record $1.728 set in mid-March.
Fires, breakdowns and storm damage at California refineries in July and earlier this month already had begun boosting prices nationwide. West Coast gas distributors, nervous about supplies, are paying record wholesale prices.
"When wholesale gas is $1.50 or $1.60 on the West Coast, and you've got a boatload on the water heading somewhere that pays less, you say, 'Well, I can afford the tariff to turn around and go through the Panama Canal' " and sell the gas in California, says Tom Kloza, an analyst at OPIS.
One of two pipelines serving Phoenix broke earlier this month, boosting prices there and siphoning more gas from regions where wholesale prices are lower. "Conditions are so tight that any change affects the whole market," says John Felmy, chief economist at the American Petroleum Institute.
Also pushing gas prices up:
Strong demand. Summer is driving season. Coincidentally, the EIA says, gasoline inventories are their lowest since November.
Pent-up price increases. Retailers need a nickel a gallon just to catch up with earlier wholesale price increases, Felmy says. They'd need to add a dime or so to recoup higher prices resulting from the blackout and West Coast shortages. "Gasoline retailers may get accused of price gouging as they attempt to pass on costs that have been percolating since the first day of summer," Kloza notes.
Political turmoil. Oil supplies are threatened by attacks in Iraq (news - web sites) and violence in Nigeria. High prices provoked selling Monday. West Texas Intermediate crude oil for September delivery was $30.89 a barrel, down 16 cents. Wholesale gasoline was $98.91 a gallon, down 1.13 cents.
