Gasoline Prices to Jump in Upper Midwest on Outages

By Brian L. Milne, Refined Fuels Editor, Telvent DTN

Retail gasoline prices countrywide remain on an upward trajectory, while pump prices in the upper Midwest metropolitan markets are set to surge after operational issues cut oil refining activity. Nationwide, retail gasoline prices are set to extend July’s upside push into August after consistently declining during the second quarter.

View Telvent DTN’s Weekly and Historical Gasoline Price Index.

In the Midwest, a fire in a coker unit at BP’s 410,000 bpd refinery in Whiting, Ind., early during the final full week of July rallied regional wholesale prices that will be passed through to the retail outlets they serve. Repairs to the now shut unit could take between two to four weeks trade sources estimate.

Coking is a thermal refining process used to produce fuel gas, gasoline blendstocks, distillates, and petroleum coke from the heavier products of atmospheric and vacuum distillate.

Industry sources also report CITGO shut the 58,000 bpd fluid catalytic cracking (FCC) unit at its 167,000 bpd refinery in Lemont, Illinois, on July 28 due to valve issues. The FCC is a gasoline producing unit. CITGO declined to comment on the outage.

Economic Stimulus
Aside from the regional issues, gasoline prices moved higher in late July on growing expectations central bankers in the U.S. and Europe would act in early August to stimulate the economy.

The Federal Open Market Committee is holding their two-day meeting this week, with the market anticipating Federal Reserve Chairmen Ben Bernanke to announce some sort of monetary easing policy at the conclusion of the meeting on Wednesday (8/1). Past efforts by the central bank to stimulate business activity through monetary easing policy has weakened the US dollar while boosting commodity and equity markets.

Mario Draghi, the European Central Bank president, last week said the ECB would do whatever was necessary within the ECB’s mandate to protect the euro, making the comment in the face of increasing debt worry from Spain and Italy. The markets took Draghi at his word, believing European Union leaders were finally ready to provide long-term solutions to the prolonged sovereign debt problems that have threatened the viability of the single euro currency within the euro zone. The ECB meets on Thursday (8/2).

Slow economic growth has dented demand for oil while the euro zone’s financial issues threaten an even wider global slowdown amid a feared contagion effect. The EU’s debt problems have been linked to slowing growth in the U.S. and China, the world’s two largest economies and two biggest oil consumers.

In futures trading, noncommercial market participants have increased their bets for higher gasoline prices, with overall interest in the RBOB futures contract climbing. The activity by this group, also known as speculators since they are not hedging an underlying futures position, tends to drive short-term sentiment.

About the Author
Brian L. Milne is the Refined Fuels Editor for Telvent DTN—a leading business-to-business provider of real-time commodity information services. Milne has been focused on the energy industry for 16 years as an analyst, journalist and editor. He can be reached at brian.milne@telventdtn.com.

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