KANSAS CITY, Kansas -- Rising retail gasoline prices in most U.S. regions could hold their gains for a while, even after the problems that caused the run-up have been resolved, reported The Wall Street Journal. Refinery problems in the last two weeks have tightened gasoline supplies during the summer driving season. Hardest hit has been the Midwest, where prices have been rising since flooding forced Coffeyville Resources to shut its Coffeyville, Kansas, refinery June 30. Gasoline supply was already constrained because the refineries the region relies on for fuel have had repeated [image-nocss] breakdowns this year, depleting the usual cushion of inventories.
Adding to the supply crunch, BP last Monday shut down the largest of three crude-oil processing units at its Whiting, Ind., refinery for unplanned repairs. The company Friday said the unit, which can process 250,000 barrels a day of crude oil, would likely be operational sometime early this week. If gasoline inventories remain low and if more refineries break down or if there are disruptions from hurricanes, gasoline prices could remain at their high levels or even climb.
Meanwhile, wholesale prices, which initially led the price increase, have recently begun to weaken, but it is unclear whether those declines will extend to the retail level. Marketers might be hesitant to lower prices right away, lest fuel costs suddenly spike again, narrowing their margins or wiping them out altogether, said the report.
The supply situation in the Midwest, which cannot count on seaborne fuel imports to ease the supply crunchcould take longer to resolve than similar occurrences in coastal areas. Small- and medium-sized refineries are the main suppliers to local markets, often with unique blends of motor fuel.
The shutdown of the Coffeyville refinery has forced marketers to scramble for supply. Tanker-truck drivers have had to drive longer distances and endure longer-than-usual waits at fuel terminals to keep up with demand.
The outage could last for months. Two weeks after the shutdown, the company is still assessing the damage and has not said when it expects to restart the refinery.
The shutdown of the crude-processing unit at BP's Whiting refinery and two weeks of concurrent unanticipated repairs at Valero Energy Corp.'s Ardmore, Okla., refinery have further contributed to red-hot wholesale gasoline prices, the report said.
The BP unit that was shut was the third and largest of three crude units to have a problem at the refinery in the past four months, it added.
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