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Closed Refineries May Jack Eastern Gas Prices

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On: Tue, Apr 24, 2012 at 10:34AM | By: Chris Weiss

Closed Refineries May Jack Eastern Gas Prices

Given the record-high-scraping cost of gas, you might be under the impression that the entire oil industry is floating on 100-dollar-bill rafts in the middle of large infiniti pools of refined oil. But that impression would be false. Oil companies are actually shutting down refineries, and it may cause regional gas prices to soar even higher than they are likely to anyway.

According to a report on CNN, older refineries in the northeast are being shut down because they can't effectively process the cheaper, heavier types of oil currently being imported from the Middle East, Venezuela and other regions. The refineries are only capable of efficiently processing light, sweet oil, which costs an extra $20 per barrel.

Sunoco, which says that it has been losing a million dollars a day for three years on its refining business, has closed one refinery near Philadelphia and is trying to sell another in the area. ConocoPhillips also closed a Philadelphia-area refinery last fall.

The closures may cause a regional gas shortage in the northeast that could result in even higher gas prices than already anticipated. Analysts have predicted that the national gas price average will beat the all-time record of $4.11 per gallon set in 2008, and some even expect the average to reach $5 per gallon by summer.

What the national average hides is higher and lower regional gas prices. For instance, earlier this month, the AAA Daily Fuel Gauge showed a national average of $3.92 for regular gasoline, but had states like California, New York and Illinois averaging between $3.99 and $4.61. Meanwhile, many states in the mid-west and Rocky Mountain region were below the national average.

Much of the northeast is already near or above national average, and if the refining issue comes to a head, prices across the region could soar well above the national average. CNN's report indicates that shortages are likely to happen after the summer, when prices come down a bit from peak season rates, and that they should only be a temporary problem. Still, what drivers don't need now is factors compounding high gas prices.


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