Gas prices stuck stubbornly high

2012-10-12T00:00:00Z 2012-10-13T00:21:23Z Gas prices stuck stubbornly highRob Earnshaw Times Correspondent nwitimes.com
October 12, 2012 12:00 am  • 

According to AAA’s Daily Fuel Gage Report, gas prices in the region are 50 cents higher than they were a year ago at this time.

Last October the average price for a gallon of regular unleaded gas in Gary was $3.29. On Thursday it was $3.75.

Oil analyst Patrick DeHaan, senior petroleum analyst at Gasbuddy.com, said gas prices typically decline in autumn as demand dwindles, sparking an increase in supply. This year, however, supplies have been down because of refinery problems.

Scott Imus, of the Indiana Petroleum Marketers and Convenience Store Operators Association, said prices were tracking down as they typically do at the end of summer. However, instances in September, such as the preparation for Hurricane Isaac in the Gulf Coast, including production shutdowns, caused them to go higher.

“Fortunately it did not do the damage they expected and were able to get those systems back on line pretty quickly,” he said.

Imus said there also were pipeline issues in Wisconsin that affected supply in the Midwest, as well as a handful of refinery issues.

Imus said in Indianapolis wholesale prices have fallen 10 cents since Oct. 1, but the competitive marketplace has not been able to pass those dips on to consumers, as prices are still higher than last October.

Imus said crude oil was trading around $90 a barrel “so that would put us in the mid-$3.50 range with everything else being back to normal with production being resumed and supply being typical.”

“Hopefully they’ll continue to fall down as they have in previous years,” he said. “But it just takes a disruption from a pipeline incident or a refinery incident to cause supply concerns.”

Jennifer Brumback, refined products editor for the Midwest, Oil Price Information Service, said this fall is a particularly heavy season for refinery maintenance.

“A lot of Midwest refineries are advantaged now because they have access to cheaper Canadian crude and some of the landlocked crude like the Bakken Shale, so they’ve been running pretty hard,” she said. “There has been a lot of refinery maintenance now, which has helped constrict supply.”

Another cause for higher prices is the structure of the market, Brumback said. Near-term barrels have been more expensive, which has limited supplies coming up from the Gulf Coast.

“There haven’t been any incentive to keep more barrels on hand than needed, because of the market structure, which has helped constrict supply,” she said.

Looking forward, Brumback said things such as BP refinery’s expansion and upgrade project in Whiting, when they comes on line, should drive Chicago prices lower relative to other markets.

Luke Oil analyst Eric McGill said “the Fed’s willingness keep interest rates low and essentially print free money through bond purchases has made all asset prices rise and RBOB gasoline is one that has risen as a result.”

Also, the refineries are making twice as much to turn crude into gasoline as they were last year on this date, he said.

“I would venture to guess that with the switch from summer to winter blend and the seasonal price trend, we will see lower gas in the fourth quarter, but there remains a great deal of geopolitical risk premium in the market with the threat of an Israel-Iran conflict,” he said.

Beth Mosher, spokeswoman for AAA Chicago, said Indiana and Illinois prices have been doing OK compared to geographic areas such as California and places in the East.

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