News Column

Midwest Gas Price Hikes to Be Felt Nationwide

May 17, 2013
gas pump

Troubles at several oil refineries are driving gasoline prices sharply higher in the Midwest, and the regional shortages are expected to boost pump prices nationwide.

While the USA may be dripping in new-found crude oil deposits, and early May supplies were at their highest levels since the early 1930s, issues at a handful of refineries that turn crude into gasoline and diesel fuel underscore how kinks in the supply chain can cause quick surges in what consumers pay at the pump.

Gas prices in Minnesota, Iowa, Missouri, North Dakota, South Dakota, Nebraska, Ohio, Oklahoma and Wisconsin have jumped up to 27 cents a gallon in the past week alone.

Behind the rise: Outages and extended maintenance has curbed output at refineries in Joliet, Ill.; Whiting, Ind.; Tulsa; and El Dorado, Kan.

In Minnesota, regular gas now averages $3.99 a gallon -- an all-time state record. With some Twin Cities outlets now selling gas for more than $4.20 a gallon, Patrick DeHaan, senior analyst for price tracker GasBuddy.com, expects Minnesota to average the priciest gasoline in the continental U.S., overtaking California, which now averages $4.06 a gallon.

"It's amazing what problems refinery issues can cause," says DeHaan. "If another refinery went down, all hell would break loose."

Nationally, prices average $3.60 a gallon after beginning 2013 at $3.29. Some industry observers thought this year's prices had peaked at $3.78 in February after they slid to $3.50 on April 29. But the Midwest's refinery issues are now expected to propel prices for several weeks, perhaps to $3.85 a gallon nationwide.

"Supplies were already low in the Midwest -- that's why we're seeing such a dramatic increase. While this is a regional problem, it's definitely going to push overall prices up -- no doubt about it," says Brian Milne of energy adviser Schneider Electric.

The price surge in the Midwest could have a broader economic impact. Thursday, the Labor Department said April's drop in gas prices helped push consumer inflation down 0.4%.

Earlier this week, the Commerce Department cited lower-price gas for spurring a slight gain in April consumer spending.

Rising gas prices will likely reverse both trends, however.

"In each of the last two years, 60% of Americans said they cut back on discretionary spending when gas prices rise," says Greg McBride, senior financial analyst for Bankrate.com.

"There's no reason to expect a different result in 2013. And any surge in gas prices would further detract from meager economic growth."




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Source: Copyright USA TODAY 2013