- The Washington Times - Tuesday, August 19, 2003


Motorists probably will face higher gasoline prices the rest of the summer because the record blackout temporarily shut down seven refineries, exacerbating short gas supplies in the West, government and industry officials say.

With gasoline supplies tight and demand soaring, prices at the pump have increased an average of about 10 cents a gallon nationally in the past three weeks and spiked much higher in some places, according to the Energy Information Administration.

The agency said the average price was $1.63 a gallon in the government’s latest survey Monday, nearly 24 cents a gallon higher than prices at the pump a year ago.

“It’s likely that prices will continue to increase through Labor Day; after that demand will fall off,” Douglas MacIntyre, an analyst for the Energy Information Administration, said yesterday. The independent agency is part of the Energy Department.

The effect on prices by the refinery shutdowns was blunted because most of them reopened fairly quickly, once electricity was restored, although not always in full production.

Except for one refinery, “we don’t think any of them suffered any damage,” said Bob Slaughter, president of the National Petrochemical and Refiners Association. He said most restarted Friday or over the weekend and are returning to normal.

But he added, “The supply-and-demand balance is so tight that if you lose major output even for a day it does have some impact. Almost anything can have an impact on prices.”

The refineries that were thrown out of service by the blackout — two near Toledo, Ohio, one near Detroit and four in Canada — only added to other problems that have pushed up gasoline prices this summer. Refinery problems related to production of summer gasoline in California and the rupture of a major pipeline carrying gas from Texas into the Phoenix area have caused prices to jump in the West.

A Marathon-Ashland refiner near Detroit was still out yesterday after an explosion during the shutdown Thursday, officials said.

Together, the refineries process more than 672,000 barrels a day of crude into gasoline and other refined products, according to industry estimates. Typical summer demand nationwide is more than 9 million barrels of gasoline a day.

Ed Murphy, a vice president at the American Petroleum Institute, said gasoline stocks have been tight all summer and prices have been affected by the high cost of crude oil, which has stayed above $30 a barrel.

“We’ve had a big demand increase in the last few weeks,” Mr. MacIntyre said.

He said gasoline use increased by about 300,000 barrels a day this summer, compared with last year. Demand peaked to a record 9.6 million barrels during the third week in July, according to EIA.

Kyle Cooper, an energy analyst for Citigroup Global Markets in Houston, predicted the price effect from the blackout would be minimal. “You might see another couple of pennies” added at the pumps because of the blackout.

Things could have been much worse.

Mr. MacIntyre said a massive refinery owned by Conoco-Phillips in New Jersey that processes 250,000 barrels of crude a day continued operating, although the blackout shut down one of the plants on site.

If the whole site had gone down, there could have been a major supply problem in the Northeast, he said.

As it was, refineries in New Jersey as well as Pennsylvania and along the Gulf Coast — which account for much of the supplies in the Northeast and Midwest — were not affected, he said.



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