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May 23, 2013

‘Sticky’ Gas Prices to Plague Midwest

 

Record high prices in much of the Midwest – including a 60 cent per gallon increase in Minnesota alone – have put a strain on many Memorial Day travelers. However, once the increased demand from this weekend dies down, it is unlikely that prices will follow it exactly. CBS News in Minneapolis explains:

“‘You do tend to see a delay when there’s a reason to drop price,’ said Akshay Rao, a pricing researcher and professor at University of Minnesota’s Carlson School of Management.

Rao said when refineries catch fire or go down, prices should go up right away, so gas stations have cash to buy the next delivery.

‘My current inventory has to take into account what the market is doing,’ he said.

But when fires go out and supply starts to climb, we don’t notice.

‘It’s less visible, less salient, and consumers are not hammering saying, ‘Hey supply went up, prices should be dropping,’’ Rao said.”

Unfortunately, the same inelastic demand that causes rapid increases in price helps to keep it that way. This only serves to exacerbate the already dismal situation for the average Midwestern consumer.

Filed under:Price Shocks | by Eyes on Energy @ 12:07 pm | 

May 22, 2013

Minnesota Senator Blames DoE for High Prices

 

Minnesota Senator Al Franken, whose state has suffered from record gas prices in the run up to Memorial Day weekend, has placed the blame for this spike in part on the Department of Energy. Senator Franken argues that the DoE’s decision to stop publishing refinery maintenance reports made it impossible to coordinate scheduled shutdowns in a way that would minimally disrupt prices at the pump. The Duluth News Tribune writes:

“The reports, authorized under the 2007 Energy Independence and Security Act, were intended to help oil companies avoid shutting down multiple refineries in the same region of the country at the same time. The department stopped publishing the reports and collecting data from refineries in 2011, citing a reduction in funding, Franken said.

Franken, D-Minn., challenged Adam Sieminski, head of the Energy Information Administration, about the issue in a hearing Tuesday after Sieminski acknowledged that simultaneous refinery shutdowns were contributing to the price spikes.

‘Gas prices in Minnesota have gone up in a startling way,’Franken said. ‘And the spike is related to multiple refinery outages in the Midwest.’”

Meanwhile, there is little relief in sight for consumers in the Midwest. The following chart from Cars.com illustrates exactly how much these refinery shutdowns have wreaked havoc on prices over the last week alone.

With the Memorial Day weekend fast approaching, all too many drivers will likely continue to feel the pain of high prices for the foreseeable future.

Filed under:Gas price,Price Shocks | by Eyes on Energy @ 12:34 pm | 

May 21, 2013

Minnesota Gas Prices Eat Into Consumer Budgets

 

The continued high prices in Minnesota, as well as much of the Midwest, have begun to eat into the budget of the average consumer – with definite effects on even the largest businesses. The Minnesota Post details:

“Comparable store sales at Wal-Marts declined 1.4 percent in the United States for the quarter that ended April 26.

In announcing its results, Wal-Mart said: ‘Comp sales performance was impacted by a delay in income tax refund checks, challenging weather conditions, less grocery inflation than expected and the payroll tax increase.’

When the payroll tax was raised by 2 percent in January, it meant smaller paychecks for Americans.

That action translated into less money for Americans to make essential and discretionary purchases, and Wal-Mart acknowledges that it has had an effect on its first quarter sales.

Now, Minnesota consumers are paying dramatically more than they expected to fill up their gas tanks, so retailers will see another wave of consumer retrenchment in their stores. (Emphasis Added)

On Monday, according to the AAA Daily Fuel Gauge Report, Minnesotans were paying an average of $4.28 a gallon for regular unleaded. That’s more than 60 cents higher than the $3.65 a gallon that’s the current national average.”

Lawmakers are continuing to propose a variety of responses to the ongoing crisis. Most recently, Vermont Senator Bernie Sanders encouraged his fellow policymakers to investigate charges of price manipulation on the commodity markets. A local paper called the Vermont Digger says:

With gasoline prices rising rapidly, Sen. Bernie Sanders today proposed an amendment to make U.S. federal regulators follow the lead of Europeans and investigate oil and fuel price manipulation.

Sanders also proposed a 30-day deadline for the Commodity Futures Trading Commission to use its emergency powers to curb excessive speculation in crude oil markets.

‘We must do everything that we can to make sure that oil and gasoline prices are transparent and free from fraud, manipulation, abuse and excessive speculation,’ said Sanders, a member of the Senate energy committee.

…’The skyrocketing cost of gasoline and oil is causing tremendous hardship to the American consumer, small businesses, truckers, airlines and fuel dealers. In fact, as we struggle to claw our way out of this terrible recession, high oil and gas prices are enormously detrimental to the entire economic recovery process,’ Sanders said.”

Still, Sanders’ recommendation will do little to alleviate the current burden Midwestern consumers face due to continued refinery maintenance.

Filed under:Fuel Price Trends | by Eyes on Energy @ 4:12 pm | 

May 20, 2013

Continued High Prices Result in Varied Responses

 

As much of the Midwest suffers from the persistent high prices caused by several refinery shutdowns earlier in the month, lawmakers and motorists alike have adopted a variety of ways to cope.

In Minnesota, where prices recently rocketed to all time highs, state legislators have taken it upon themselves to prevent future outbreaks. According to ABC News in Minneapolis-St. Paul:

“The uptick prompted Senator Amy Klobuchar (D-MN) to send a letter to Secretary of Energy Steven Chu on Thursday urging him to examine the timing of the closures.

Sen. Al Franken (D-MN), who introduced legislation last year to eliminate excessive oil speculation that drives up gas prices, released a statement saying he’s working with the Department of Energy to explore ways to avoid multiple closures like this in the future.”

However, motorists are simply trying to go about enjoying their Memorial Day vacation plans. In Sioux Falls, South Dakota, local news sources report:

Cross-country traveler John Pietkiewicz said ‘You’ve got to pay [the higher prices]. You think more in terms of I’m glad that I have a vehicle that’s relatively fuel efficient.’

Marilyn Buskohl, AAA said: ‘I don’t really foresee that it will really affect travel. I really think that people are people are unfortunately having to get used to the high prices and I think they just somehow make it work.’

And some travelers agree, they are not going to let the increase in prices stop them from keeping their vacation plans intact.”

With no end in sight to these still increasing prices, it is certain that consumers and fleet managers alike are feeling the summer squeeze.

Filed under:Gas price,Price Shocks | by Eyes on Energy @ 4:25 pm | 

May 17, 2013

Midwest Gas Prices Continue to Spike Due to Refinery Malfunctions

 

States in the upper midwest are feeling extra pain this week as mounting refinery malfunctions drive prices at the pump to record highs. Aside from the two Chicago-area breakdowns that were responsible for trouble earlier in the week, problems at refineries in Kansas and Oklahoma also served to exacerbate the situation. According to the USA Today:

“Gas prices in Minnesota, Iowa, Missouri, North Dakota, South Dakota, Nebraska, Ohio, Oklahoma and Wisconsin have spiked up to 40 cents a gallon the past week alone…

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.

In Minnesota, regular, unleaded gas averaged $4.15 a gallon heading into the weekend — an all-time state record. With some Twin Cities outlets now selling gas for more than $4.50 a gallon, making Minnesota the priciest state for gasoline in the continental U.S., overtaking California, which now averages $4.06 a gallon. In oil-rich North Dakota, prices average $3.98, also a record-high.

‘It’s amazing what problems refinery issues can cause,’ says Patrick DeHaan, senior analyst for price tracker gasbuddy.com. ‘If another refinery went down, all hell would break loose.’”

As Americans prepare to hit the road once again for the summer driving season, it appears as though there will be no relief for the immediate future. The Wall Street Journal reports:

“Rising crude-oil prices and tight supplies are among the factors that have recently pushed prices higher at the pump, according to AAA’s Daily Fuel Gauge Report. For 73 consecutive days the national average has been lower than it was on the same day a year ago…

The recent trend toward higher prices has affected most states, with only West Virginia and Ohio posting lower prices now than a week ago.  Prices in six states; Oregon, Minnesota, Washington, Oklahoma Nebraska and Iowa) have jumped by more than 20 cents, AAA said.”

This is yet another telling example of the power seemingly insignificant price shocks can have over large parts of the country. As more refineries switch away from their winter mix, more delays and malfunctions remain a definite possibility.

Filed under:Fuel Price Trends,Price Shocks | by Eyes on Energy @ 5:28 pm |