The Herald Bulletin

Morning Update

Breaking News

July 4, 2013

Gasoline prices begin summer slide

(Continued)

NEW YORK —

While analysts are not expecting a resulting surge in gasoline prices, they could rise quickly if the Mideast unrest does disrupt oil supplies. Gas could also climb if a hurricane threatens the heart of the refining industry along the Gulf Coast.

This year's early summer decline, while welcome, is smaller than the seasonal drops of the last two years, when gas prices also fell between Memorial Day and Independence Day. Gasoline is 15 cents more expensive than it was last year at this time.

Gas prices typically rise in late winter or early spring when refineries perform maintenance and switch from making winter gasoline blends to the more complex summer blends required for clean-air rules. When the nation's refineries aren't operating at full strength, supplies drop and prices rise. Once the maintenance is done, output rises and prices fall.

"When refineries go down it can create immediate and severe havoc," Kloza said. "It's a very shallow distribution system, quick to fill and quick to empty."

That's what happened in the Midwest earlier this year. A fire broke out at a Marathon refinery in Detroit in late April while maintenance was underway at an Exxon Mobil refinery in Joliet, Ill., and a BP refinery in Whiting, Ind.

Prices soared above $4 per gallon in parts of Ohio, Michigan, Wisconsin and Indiana. As the refineries recovered, prices quickly fell. By July 3, Ohio prices were $3.33.

Regional spikes and plunges are likely to happen more often in coming years. The number of U.S. refineries has shrunk by a quarter since 1993 to 143, but the nation's refining capacity has grown 18 percent since then. The remaining refineries are getting bigger, so if one goes down, it's a bigger shock to the system.

Some U.S. drivers will be paying a little more because of higher gasoline taxes that went into effect July 1. California and Maryland taxes rose 3.5 cents per gallon, Connecticut's climbed 4 cents, and Wyoming's 10 cents. Virginia drivers are getting a break — gas taxes there are falling 6.4 cents.

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