Twin Cities gas prices have skyrocketed.
., MARLIN LEVISON Star Tribune
Our sky-high gas prices expected to last until June
- Article by: David Shaffer
- Star Tribune
- May 21, 2013 - 9:26 AM
Heading into the Memorial Day weekend, Minnesota motorists are paying the highest prices ever for gasoline.
The rapid run-up in prices in the past week — to a statewide average of $4.28 per gallon Monday — tops the 2008 record of just under $4 per gallon, according to AAA data.
Minnesota now has the highest-priced gasoline in the lower 48 states, followed by North Dakota.
The Upper Midwest’s unprecedented spike in gas prices is believed to be the result of planned and unplanned refinery shutdowns across several states. The resulting supply shortages should ease in a few weeks, pushing gas prices back down, oil analysts say.
“It is apocalypse now — it is not apocalypse June,” said Tom Kloza, chief oil analyst for GasBuddy. Com, which tracks gas prices. “It will back off. You will see a June swoon to prices that are more consistent with the rest of the country.”
The national average price Monday was about $3.65 a gallon for regular gasoline, according to GasBuddy.com and AAA.
Just a year ago, as gasoline prices soared on the coasts, less expensive crude oil from Canada and North Dakota helped ease the pain at Midwestern pumps. Now, Kloza said, even Oklahoma and Nebraska are approaching record gasoline prices because of the refining squeeze.
Not all Midwestern states have been hit so hard, as Scott Egleston of Chaska discovered over the past weekend when he drove to South Bend, Ind., and back again. “I didn’t see any $4 gas” in Wisconsin, Illinois or Indiana, he said. Even the usually pricey stations on an Illinois toll road sold cheaper gasoline than Minnesota’s stations, he added.
Oil experts said rising mid-continent gas prices result from recent partial or complete shutdowns of two major refineries in Illinois and Indiana, along with some planned and unplanned outages or slowdowns of refineries in Kansas, Oklahoma and Minnesota.
“There is a lot of gas in America,” said Carl Larry, who publishes the “Oil Outlooks and Opinions” newsletter. But the gasoline is not distributed evenly, he said.
“Minnesota is not normally a place that needs to import. It usually sends gasoline out. That has caught us in a little bit of a supply shortage in the Minnesota area,” Larry said.
Larry said he expects prices to ease in the region in three to four weeks, but predicts they will remain at $3.80 to $3.90 a gallon for the rest of the summer. He said demand for motor fuel has been rising, and if the economy further improves, that trend will continue.
‘We thought it was a typo’
The latest price shock came suddenly. Steven Anderson, CEO of Bobby & Steve’s Auto World, said two gasoline suppliers for his company’s eight Twin Cities-area stations send out e-mails each morning noting how much the wholesale price likely will go up or down. Last Tuesday’s e-mails said that day’s price would rise 2 cents, he said.
“By the time the load showed up at 7 p.m. it was 25 cents, and we thought it was a typo at first,” Anderson said. More price hikes came in the days to come, prompting “a lot of rebellion by customers” as the price at the pump rose steadily, he added.
There were some signs Monday that gas prices might be easing. GasBuddy.com, which offers real-time price tracking based on reports from users, showed Minnesota prices trending downward. But prices also ranged widely — from $4.09 a gallon to $4.49 a gallon.
Genscape, a Louisville, Ky.-based company that uses aircraft, infrared cameras and other methods to alert oil traders to what’s happening at refineries, also offered some positive indicators.
Brian Busch, Genscape’s director of oil market and business development, said the company expects the BP Whiting, Ind., refinery, to be back up within two weeks. Its output had been significantly reduced during a major upgrade, he said.
In Minnesota, he added, Genscape surveillance detected that Flint Hills Resources Pine Bend Refinery on Sunday night restarted a coker unit after repairing damage from a recent fire. Flint Hills, like many refineries, does not routinely comment on such reports. But Busch said those repairs should restore about 24,000 barrels per day of production.
Increased supply expected
Mike Green, a spokesman for the AAA Fuel Gauge Report, said he expects gas prices in Minnesota to start dropping in early June as refiners bring plants back online.
“We are expecting increased gasoline supplies from the Gulf Coast to make it into the region,” Green added. “Given the fact that gas prices are so high there is a big financial incentive right now for wholesalers to move as much gasoline into the region as possible.”
One side effect of the gas-price jolt is that E85, the blend of 85 percent ethanol and 15 percent gasoline that can be used only in flex-fuel vehicles, is now price competitive for the first time in more than a year, said Dan McCullough, founder of E85prices.com, based in St. Cloud.
E85 is selling for about 20 percent less than regular gasoline in Minnesota, he said. That’s important because E85 packs about 15 percent less energy than gasoline, so it has to be that much cheaper to make it worthwhile. Only about 4 percent of U.S. vehicles can use the fuel.
“That’s the beauty of owning a flex-fuel vehicle,” said McCullough. “When oil ticks you off, you buy ethanol. When ethanol ticks you off, you buy oil.”
David Shaffer • 612-673-7090
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