Those wanting to pinch their pennies this summer might not get any help while paying at the pump.
The flooding and closure of an oil refinery earlier this month in Coffeyville, Kan., has reduced U.S. fuel supplies. This, in turn, has caused the wholesale price of gasoline to soar, according to industry experts.
A July 6 Department of Energy report said the closure of the southeast Kansas refinery halted the production of 2.1 million gallons of gasoline daily. This snag, in addition to the closure of many other refineries across the United States, could cost consumers a steadily increasing price.
Just one day after the closure of the Coffeyville refinery, gas prices spiked 10 cents per gallon. By the end of that week, prices had risen to $3.25-$3.50 per gallon in the Midwest and Great Lakes, said Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service.
He said the prices that consumers would pay in the following weeks could be the highest of the year.
"Coffeyville lit the fuse," Kloza said in a July 11 Associated Press report. Kloza also said that problems at a Valero refinery in Ardmore, Okla., and at a BP refinery in Whiting, Ind., near Chicago also are contributing to high wholesale prices. "Ardmore was a basic hiccup for a U.S. refinery. But having a hiccup on the backside of kind of a major organ disappearing is pretty serious."
Before the flooding, the Coffeyville Resources refinery produced 108,000 barrels per day of gasoline, diesel and other fuel oils, representing about one-seventh of the refining capacity for the Great Plains, Kloza said.
As of last week, gasoline demand had grown to 9.6 million barrels a day, 1.4 percent higher than the same period last year, according to the Energy Information Administration.
"It looked like we were on a relatively smooth path for about a month," Kloza said. "But having some operational problems on the heels of a refinery being under water and lost for a considerable amount of time has sent the market into kind of paroxysm."
Jon Callen, president of the Kansas Independent Oil and Gas Association, predicted the states most affected by the Coffeyville flooding would be Kansas, Missouri, Arkansas, Oklahoma, Nebraska, Iowa, Minnesota, northern Texas and parts of the Dakotas.
"Effectively, the market was balanced before Coffeyville had to shut down. There's now a big hole in the entire market centered in Coffeyville, so the gasoline that Coffeyville was providing the region now is going to want to be made up from other refineries that already have been balanced and had people wanting to buy their gasoline," Callen said.
Greg Beheler, AAA spokesman in Charleston, W.Va., said other factors also were playing a role in the price spike, including high crude oil prices and a tight global oil market.
"Keep in mind gasoline is a commodity, and it follows the laws of supply and demand," he said. "Anytime when supply is interrupted and the demand is strong, that is usually the perfect formula for in this case higher gas prices."
The Associated Press contributed to this report.
