GAITHERSBURG, Md. -- It has been a jumpier-than-expected June for many gas stations in the Midwest as refinery glitches have contributed to a recent gas price surge, not unlike what the West Coast experienced earlier this year. The future path will bring surge states back in line with national trends … eventually.
Gasoline prices throughout the Great Lakes have spiked in the last week with big jumps witnessed in Michigan, Indiana, Ohio, Kentucky, West Virginia, Illinois and Wisconsin, thanks to a laundry list of refinery outages and maintenance taking place in the region, combined with complex pipeline rules and localized summer gasoline requirements and a major motivated buyer in the market.
Some sources point to issues at several refineries in Illinois and Ohio for the bulk of the supply tightness, which has led some Ohio racks to see a significant price inversion between branded gasoline and unbranded gasoline. The situation at other racks has been worse, with some suppliers running completely dry of several grades of gasoline.
While the situation plays out, it’s a dangerous one for individual gas station owners to get involved in, especially those who sell low volumes of gasoline: either you pay the higher, temporary price, or wait, hoping supply issues ease and prices come back down.
It’s a rare situation that has led some gas stations in Tennessee and Ohio to deliberately hold off on refueling, refusing to play the high-stakes roulette game of buying unbranded gasoline at lofty prices while branded outlets see far lower prices, hoping that if they do buy supply, prices won’t crash, leaving them with far more expensive gasoline than their competitors, or selling it at a motivated price, making less margin, just trying to move volume.
Hot spots can even flare up as they have in the last couple of weeks where racks can see wild swings and fluctuations, and it some cases, racks that are further away see less price disruption. In some cases, it can pay to send trucks to nearby racks, so long as product specs are the same.
Perhaps the good news is that refinery issues and markets with tight supply eventually see relief. The Great Lakes is seeing more light: several refineries that had seen malfunction are restarting and lofty prices have discouraged the few remaining maintenance projects to simply take their time, perhaps leading to an environment that refiners should take what they can get.
Indeed, we’re in an environment in the Midwest that currently sees more future downside on gasoline prices than upside, especially if key refineries in Illinois and Ohio don’t have prolonged restarts or glitches coming back online.
Motorists will certainly welcome the relief, especially in light of words from yours truly that gasoline prices have peaked, only to lead me to step backwards after the unexpected refinery issues surfaced, and I now like to say we’re in the 8th or 9th inning of this latest gas price rally.
In previously hard-hit California, motorists have seen nothing but falling prices and stations equally happy with healthy margins. In fact, some West Coast areas are the only to see monthly declines: California is down 30 cents versus a month ago, Nevada off 8 cents and Arizona down a nickel. On the other hand, Washington and Oregon have been dealing with some declines in gasoline supply that may see their prices spiking, along with upward movement in Alaska.
Patrick DeHaan is senior petroleum analyst for GasBuddy, Gaithersburg, Md. Reach him at pdehaan@gasbuddy.com
Gas price changes from June 10 to June 17.
Source: GasBuddy
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