Posted by: Josh Lehner | June 4, 2012

Update on Gas Prices

Just a quick note on local/regional gas prices. While the nation has seen the price at the pump decline approximately 30 cents per gallon in the past 2 months, NW drivers know that we’ve actually seen increases in the cost of gas. The main reason for this divergence is the fact that while crude oil prices are largely set in an international market, retail gas is much more localized due to the location and distribution capabilities of the refineries that produce the finished product (gasoline). As seen in the graph below, national gas prices have followed oil prices down with expectations for further decreases in the near future. Portland and Seattle prices increased significantly a month ago and are just now beginning to show some slight declines. The second image below shows gas prices by county across the nation. The source for both images is GasBuddy.com.

The West Coast has the highest prices in the nation and while some of that is the fact these states have higher gasoline taxes, the main current issue are the disruptions at the local refineries. According to the Oregon/Idaho AAA:

But gas prices skyrocketed on the West Coast this month because lingering refinery issues have created very tight supplies in this region. Washington state’s largest refinery, Cherry Point, was shut down in February after a fire and has been mostly off line since then, and there’s been a string of unplanned outages at other refineries in the region. The U.S. Department of Energy says these low refinery runs led to several weeks of inventory draws which left gasoline inventories on the West Coast at 24.1 million barrels on May 18, about 5.1 million barrels (17 percent) below typical levels for that date, the lowest for the region since March 1999.

The West Coast is especially sensitive to refinery outages because this region is fairly isolated. There are few significant pipeline connections to other markets, and long distances from the active trading markets in the Atlantic Basin.

Furthermore, according to a report out of California, 3 out of the Bay Area’s 5 refineries have had work performed on them recently, likely resulting in some supply constraints during the down time. The following map, from the U.S. Energy Information Administration, shows the locations of the U.S. refineries.

All told, gas prices are generally decreasing and if it weren’t for the local/regional disruptions, NW drivers would have benefited from the same declines the rest of the nation experienced in recent weeks. Expectations are for NW prices to decline in the near future as the refinery issues are fixed and more supply is brought online.


Responses

  1. Gas prices tend to be at the highest these days, i seriously wish that the gasoline costs will be reduced as the economoy as well as economic turmoil improves.


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