Prices spike at Austin’s pumps to near $4 per gallonPublished 10:05am Thursday, May 16, 2013
Gas prices near $4 a gallon started showing up in Austin in recent days, and experts say they are not expected to drop significantly for a week or more.
The culprit? Oil refineries that serve mid-continent states such as Minnesota already were diverting output to states a little farther east to relieve shortages there. The refineries are also in the midst of switching over to summer-grade gasoline.
The result is that “supply tightness in mid-continent states is causing prices to go through the roof,” said Patrick DeHaan, a Chicago-based senior petroleum analyst for GasBuddy.com, a price-monitoring website.
This morning, the crowd-sourced GasBuddy website showed 11 Austin gas stations charging $3.97 per gallon. The average was $3.95, and the two lowest this morning, according to the site, were Sinclair and the Freeborn County Co-Op on Minnesota 56, both at $3.85.
It could be worse, though.
The website had several Twin Cities gas stations charging $4.19 a gallon. The site had most Rochester stations at $3.97, a station in Owatonna at $4.09 and most at $3.99, and stations in Albert Lea between $3.80 and $3.97. The average price in Minnesota was $3.95, and the trend was upward.
The spike in prices at the pump occurs even as the price per barrel for crude oil has fallen.
Last week, crude oil traded at more than $96.30 per barrel. On Wednesday, it was trading closer to $94. Market analysts pointed to fresh signs of a continuing recession in Europe and decreased demand in that region as a key cause.
But the flow of gas from refineries to local stations is the bottleneck in the Midwest that’s leading to rising prices, DeHaan said.
In recent weeks, refineries that serve Minnesota and other Midwest states started diverting output to Great Lakes states, including Illinois and Michigan, because of shortages there and the chance to take advantage of higher prices. But that tight supply in the Great Lakes region has been resolved, DeHaan said.
A new threat to the mid-continent supply is a refinery in Tulsa, Okla., that is starting to do maintenance now, DeHaan said.
It’s also no secret to Midwesterners that gas prices often seem to rise around the Memorial Day weekend, and they might suspect it’s a gouge by producers trying to capitalize on a big travel weekend.
But DeHaan said refineries are required by the Environmental Protection Agency to switch over from winter gas to cleaner-burning summer gas by May 1. Because the refineries start from scratch, it takes a while to build up inventory of the summer product, usually until sometime in June, he said. That’s when prices often start to slide.
The reverse doesn’t happen in the fall, DeHaan said, because there’s no hard deadline to switch back to winter-grade gasoline. That means it’s easier to manage inventory during the production changeover.
But it’s the summer season now, and in the Twin Cities, “prices may stay above $4 for at least a week,” DeHaan said. “It depends in the next week or two if refineries can build up enough supply.”
—The McClatchy-Tribune contributed to this report.