SUNDAY BLOG:
Just as our economy is starting to recover and employers are adding jobs, rising costs for gasoline, avialtion fuels, and diesel are threatening to dampen it.
According to AAA Fuel Gauge Report, the national average for a gallon of gasoline was $3.54 on Saturday, but don't expect it to drop soon. To the contrary, Tom Kloza, chief analyst at the Oil Price Information Service recently forecast gas prices will hit a $4 national average by Memorial Day and could even approach $5 a gallon in certain regions.
Prices go up in spring mainly because refineries temporarily shut down to flush out winter fuel blends and prepare to make more expensive summer blends, said Jessica Brady, spokeswoman with AAA Auto Club South. Summer blends are required by the Environmental Protection Agency to help reduce smog-forming tailpipe emissions.
To make matters worse, Brady said, several refineries worldwide have shut down, which has limited gasoline supply.
Brian Milne, editor of Refined Fuels for the commodity research firm Telvent DTN, said two refineries in the Mid-Atlantic area have permanently closed and a third will shut down by the summer. Also, European refiners export a significant amount of gasoline to the United States, and Switzerland-based refiner Petroplus recently closed five of its refineries because it could no longer fund their operations.
Then there is the matter of the BP refinery at Cherry Point fire Friday afternoon which slowed refining. No one knows for sure what that impact will be, but BP is a critical part of our fuel supply processing 230,000 barrels of crude each day when operating at normal levels.
While refining capacity is part of the reason petroleum producers are going up. There is the matter of crude oil supply interruptions and our inability to explore for new sources in the United States and in our coastal waters.
International tensions over Iran's nuclear weapons program has energy traders nervous. Iran is the second largest producer of crude in the Mideast. To give you an idea of the impact, last year amid revolutions in North Africa and the Middle East, gas prices spiked 3.5% in January 2011 and kept rising nearing $4 a gallon in May. Those higher prices tricked through to other goods and dragged on consumer spending causing a slow down in economic growth and hiring.
CNN Money reports Inflation picked up slightly last month, as rising gas prices took a bigger bite out of consumers' wallets. Rising prices at the gas pump were a key factor, increasing 0.9% during the month, the Labor Department said.
So what is the solution?
We need to have adequate refining capacity which can compensate for the loss production if a hurricane shuts down the Gulf of Mexico region refineries, a fire hampers BP at Cherry Point, and to meet growing demand.
Second, we need a stable supply of crude for our domestic reserves and from our friends like Canada. That means expediting approval of the expanded Keystone Pipeline through the Midwest.
And, our political leaders from President Obama down to local elected officials need to understand the ties between a stable and reasonable priced energy supply on our economy, jobs and hard-working families---average people who are trying to feed their families, pay their bills and save some money for their kid's college educations.
Don C. Brunell, President (DonB@awb.org)
