Storms Spike Wholesale Gasoline Costs in Midwest

gasnozzleBy Brian L. Milne, Energy Editor, Schneider Electric

Just as worry demand for oil would be less than previously projected amid expectations for sluggish global economic growth led to a widespread selloff that dropped gasoline futures to their lowest point since mid-January, wholesale costs in the Midwest surged on storm-triggered supply disruptions.

Reformulated blendstock gasoline futures (RBOB) tumbled to a $2.7025 gallon three-month low in trading on the New York Mercantile Exchange on April 18. Nearest delivered RBOB futures are down 56.47cts or 17.3% from March 11 when it posted a $3.2672 gallon six-month high to the April 18 low.

RBOB futures are used as the national benchmark for gasoline prices, with traders buying and selling gasoline in the spot market in a price differential to the futures contract. Regional spot prices direct supplier offers at the wholesale distribution terminal that, in turn, guide the price set for gasoline sold at retail outlets.

Extreme weather in the Midwest in mid-April sparked a double-digit spike in spot gasoline prices in Chicago, as storms raged across the upper Midwest and heavy rains caused flooding and power outages that forced the shutdown of the Badger Pipeline system and numerous truck racks in their wake.

A CITGO official on April 19 said the company’s 167,000 bpd Lemont, Ill., refinery “remained operational” the day prior though the facility experienced minor flooding and electrical issues due to extreme weather conditions.

Wholesale rack postings in the Chicago and Cleveland markets surged more than 30cts through the week ended April 22, and were up nearly that much in the Detroit and Indianapolis markets.

Weather was also a factor affecting the Gulf Coast market. Power outages in the refinery-rich area knocked three facilities offline in the Port Arthur, Texas, region that interrupted an estimated 6% of domestic oil production and generated aggressive buying by trade companies. The refineries in question have since initiated restart procedures.

Wholesale gasoline costs in the Dallas/Fort Worth metropolitan market jumped a nickel while 6cts higher in San Antonio. Elsewhere, wholesale gasoline costs were mixed with an upside bias.

The Energy Information Administration’s retail gasoline price average has declined for seven consecutive weeks through April 15 to a $3.542 gallon 10-week low. Since Feb. 25, when the average reached $3.784 gallon, the current high for 2013, the average is down 24.2cts or 6.4%.

 About the author
Brian L. Milne is the Energy Editor for Schneider Electric—a leading business-to-business provider of real-time commodity information services among many other activities. Milne has been focused on the energy industry for 17 years as an analyst, journalist and editor. He can be reached at



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