Industry: Gas price woes a supply problem

Published 12:00 am Saturday, June 17, 2000

Despite an oil refinery located in Catlettsburg, the price of gasoline at area pumps continues to skyrocket – and consumers are asking why.

Saturday, June 17, 2000

Despite an oil refinery located in Catlettsburg, the price of gasoline at area pumps continues to skyrocket – and consumers are asking why.

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Petroleum industry leaders say the answer lies in their inability to provide ample amounts of petroleum products such as gasoline to the area because of recent pipeline mishaps in the Midwest.

Refiners are defending their ability to produce gasoline by pointing the finger at a variety of factors, such as low inventories in various regions and a surge in crude oil costs.

All of that has caused a continuous price increase throughout the region – from less than $1 per gallon at times last year to an average of $1.50 or more in recent weeks.

"The first thing people need to consider is that the Midwest can only supply 75 percent of regional demands," said Troy Reynolds, Marathon Ashland Petroleum (MAP) spokesperson. "The other 25 percent, or one million barrels, has to be shipped in from overseas."

Midwest petroleum products are also reported to be at a low, causing oil companies to have more demand for gasoline than their current supply will allow.

"The supply in the Midwest just has not been there this year," Reynolds said. "We have to follow the laws of supply and demand, and supply has been extremely tight, which causes prices to increase.

"Even though there’s a refinery in Catlettsburg, we still have to ship those petroleum products to other areas. It has to be dispersed out evenly throughout a huge distribution area."

According to a MAP press release, gasoline stocks in the Midwest – including blending components used to make reformulated gasoline – are 15 percent below the five-year average for the region.

Stocks are the lowest they’ve been since 1981, according to the U.S. Department of Energy.

Crude oil prices per barrel have also nearly doubled over the historic low price companies paid this time last year, Reynolds said.

Other factors causing gasoline shortages include recent pipeline disruptions occurring in the Midwest, he said.

In early March, a break in the Midwest pipeline Explorer caused a week-long shutdown which resulted in the loss of 10 days worth of gasoline.

MAP officials have said that this loss was not replaced and the pipeline continues to run at 80 percent until it is inspected and tested as dictated by the U.S. Dept. of Transportation.

A pipeline between Chicago and Green Bay, Wis., also was shut down from June 2 to June 5 – this time for mandatory DOT testing. Another 196,800 barrel-per-day pipeline running from Chicago to Detroit ruptured on June 7 in Michigan. It is scheduled to return to service in the near future.

"We’ve been hiring more trucks and barges to make sure the demand is taken care of as a result of the pipelines we’ve got down," Reynolds said. "As a result, prices have to increase."

With prices continually on the rise, authorities are unable to answer when consumers can expect to be paying less at the pumps.

"It’s unpredictable how long prices will fluctuate," Reynolds said. "Our company wants to make a product that’s best for everyone involved and affordable.

"It’s in our best interest to have a product that’s affordable. The last time we had a supply shortage was during the Gulf War. Hopefully, it won’t continue much longer."