Midwest Gas Prices Jump Due to New Refinery Problem

The national average price for regular unleaded gasoline ended a 27-day streak of daily declines last week and has since increased for six straight days. Today’s average price of $2.67 per gallon is an increase of eight cents per gallon versus one week ago, due largely to a new refinery problem in the Midwest. Despite recently rising prices, drivers are saving nine cents per gallon month-over-month and continue to enjoy significant yearly savings with today’s average discounted 79 cents per gallon versus this same date last year.

 Motorists in the Midwest are familiar with volatile prices during the summer driving season, yet it is very rare to see the magnitude of the price jumps that occurred over the past week, particularly in Indiana, Illinois, Michigan, Ohio and Wisconsin. Prices in the region moved markedly higher on the heels of news that BP had unexpectedly shutdown the largest of its three crude distillation units (CDU) at its Whiting, Indiana refinery on Saturday, August 8 for unscheduled repair work. The refinery is capable of producing 430,000 barrels of refined product per day, and the shutdown of the facility’s CDU has noticeably impacted supply within the region. BP is reportedly working to meet its fuel supply obligations and has yet to report when it expects the unit to resume production, though initial reports indicate it may take a month or longer to repair. While the Great Lakes region has experienced the largest price increases, drivers in neighboring states and in the Central United States also have seen prices rise over the past week in response to this latest refinery problem. 

Locally, South Jersey motorists are paying average of $2.27 for a gallon of unleaded fuel. This represents a decrease of 6 cents per gallon compared to last week ($2.33), and a 24-cent per gallon drop compared to one month ago ($2.51). Today’s price is also 95 cents less per gallon than one year ago ($3.22).

Retail averages on the West Coast also remain volatile due to changes in the balance between supply and demand. California ($3.58) remains the nation’s most expensive market for retail gasoline, and is joined by Alaska ($3.47), Nevada ($3.22), Hawaii ($3.20) and Illinois ($3.16) as the nation’s top five most expensive markets.  Consumers in South Carolina ($2.18) and Alabama ($2.21) are paying the nation’s lowest averages at the pump.

Week-over-week the average price at the pump has climbed higher in 20 states. Pump prices in the Midwest have skyrocketed due to the aforementioned refinery issues. Motorists in Indiana have seen prices jump by 59 cents per gallon over this period, and similar price surges occurred in the neighboring states of Illinois (+56 cents), Michigan (+51 cents), Ohio (+44 cents) and Wisconsin (+39 cents). On the other end of the spectrum, prices are down in 30 states and Washington D.C., and have fallen in a less dramatic fashion with the largest declines in New Jersey (-5 cents), Rhode Island (-5 cents) and Delaware (-5 cents). 

Drivers in the majority of states are experiencing monthly savings at the pump. Retail averages have moved lower in 39 states and Washington, D.C., month-over-month, and price comparisons in 30 states and Washington, D.C., are reflecting double-digit savings. The largest discounts in price over this same period are in California (-30 cents), Delaware (-23 cents) and North Carolina (-21 cents). Motorists in 11 states are paying monthly premiums at the pump, led by Indiana (+38 cents), Illinois (+32 cents), Michigan (+26 cents), and Wisconsin (+25 cents). 

The relatively low price of crude remains evident in the significant year-over-year savings at the pump. Pump prices are discounted by $1 or more in five states compared to this same date last year: Hawaii (-$1.11), Connecticut (-$1.06), Vermont (-$1.06), Alabama (-$1.00) and New Hampshire (-$1.00), and drivers in more than half of states (34 states and Washington, D.C.) are enjoying yearly savings of 75 cents or more per gallon.  

Market fundamentals continue to support the price of crude moving lower in the near term due to global oversupply. In addition to reports confirming the likelihood of sustained production from both OPEC and higher cost production countries like the United States, which has kept downward pressure on the price of crude, the market is now responding to reports that the Japanese economy is shrinking. Both exports and consumer spending fell in Japan from April to June, which has been viewed as yet another signal that supply will likely outpace demand in the near term. 

West Texas Intermediate opened the week trading at a six-year low due to this evidence of continued global crude oversupply and weakening economies. This comes on the heels of WTI closing out last week at $42.50 per barrel, up slightly on the day.

Motorists can find current gas prices along their route with the free AAA Mobile app for iPhone, iPad and Android. The app can also be used to map a route, find discounts, book a hotel and access AAA roadside assistance. Learn more at AAA.com/mobile