Slowing economic activity in the United States and overseas has cut demand for both crude oil and gasoline and sent retail pump prices tumbling an average 20 cents per gallon at filling stations across the country, according American Automobile Assn.’s (AAA) online Fuel Gauge Report.
However, tumbling fuel prices, which according to the U.S. Dept. of Energy (DOE) also includes diesel at under $1.40 per gallon for the first time this year, are not expected to last.
According to Oil Price Information Service (OPIS), which AAA’s Fuel Gauge is based on, several refiners are scheduling midsummer maintenance or reducing crude runs. That could soon break the free fall for wholesale gasoline prices, OPIS said.
OPIS said it conducted a comprehensive survey that shows that at some point during late July or early August, upwards of 770,000-850,000 barrels per day of refining capacity could be off line as the result of unplanned unit problems or conscious decisions to reduce crude runs or perform maintenance. That represents about 5% of the U.S. daily refinery output.
Tosco, Premcor, Koch, Citgo, UDS, Valero, Crown and Sun are among the refiners citing run cuts. Major oil companies such as ExxonMobil, Equilon (Shell/Texaco) and BPAmoco did not comment to OPIS.
OPIS’s survey shows an assortment of reasons for the cutbacks. Some companies have cited poor refinery margins, and are simply not willing to operate units when the sale price of gasoline is less than the cost of crude oil and feedstock. Other firms have simply moved up maintenance that had been scheduled for September or October.
Ultimately, the cuts could remove some of the excess gasoline, which has sent wholesale prices down in some regions by more than 50 cents per gallon this summer. Last week's American Petroleum Institute (API) report showed a 13-million barrel stock surplus to Summer 2000 levels thanks mostly to record high output in June and July.
OPIS noted that many of the refinery run cuts may take weeks to show up in API or DOE data because idling refinery units is a complicated procedure and maintenance crews must be secured weeks before unit work is performed.
AAA said the nationwide average price of self-serve regular gasoline is now $1.426 per gallon, down 20.3 cents since mid-June. AAA says it is the steepest one-month decline in fuel prices since it began doing monthly price reports in 1990. The average price is also down 16.5 cents from one year ago, when it was $1.591 per gallon.