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Gas prices heading higher near term

4:08 AM, May 17, 2013   |    comments
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Troubles at several oil refineries are driving gasoline prices sharply higher in the Midwest, and the regional shortages are expected to boost pump prices nationwide.

While the USA may be dripping in new found crude oil deposits and early May supplies were at their highest levels since the early 1930s, issues at a handful of refineries that turn crude into gasoline and diesel fuel underscore how kinks in the supply chain can cause quick surges in what consumers pay at the pump.

Gas prices in Minnesota, Iowa, Missouri, North Dakota, South Dakota, Nebraska, Ohio, Oklahoma and Wisconsin have spiked up to 27 cents a gallon the past week alone. Behind the rise: outages and extended maintenance has curbed output at refineries in Joliet, Ill., Whiting, Ind; Tulsa, Okla, and Eldorado, Kansas.

In Minnesota, regular, unleaded gas now averages $3.99 a gallon -- an all-time state record. With some Twin Cities outlets now selling gas for more than $4.20 a gallon, Patrick DeHaan, senior analyst for price tracker, expects Minnesota to average the priciest gasoline in the continental U.S., overtaking California, which now averages $4.06 a gallon.

"It's amazing what problems refinery issues can cause,'' says DeHaan. "If another refinery went down, all hell would break loose."

Nationally, prices average $3.60 a gallon after beginning 2013 at $3.29. Some industry observers thought this year's prices had peaked at $3.78 in February after sliding to $3.50 April 29. But the Midwest's refinery issues are now expected to keep propel prices for several weeks, perhaps to $3.85 a gallon nationwide.

"Supplies were already low in the Midwest - that's why we're seeing such a dramatic increase. While this is a regional problem, it's definitely going to push overall prices up - no doubt about it,'' says Brian Milne of energy adviser Schneider Electric.

The price surge in the Midwest could have a broader economic impact. Thursday, the Labor Department said April's drop in gas prices helped push consumer inflation down 0.4% Earlier this week, the Commerce Dept. cited lower priced gas for spurring a slight gain in April consumer spending.

Rising gas prices will likely reverse both trends, however.

"In each of the last two years, 60% of Americans said they cut back on discretionary spending when gas prices rise,'' says Greg McBride, senior financial analyst for "There's no reason to expect a different result in 2013. And any surge in gas prices would further detract from meager economic growth."

Gary Strauss, USA TODAY

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