A couple of weeks ago, I was griping that I had to pay $3.50 a gallon or so after a longtime partnership between my grocery store and a local gas station was canceled. Yesterday, I had to fill up my tank again … and I practically had to fill out a loan application. The price at the pump in my neighborhood was $4.39 a gallon, as gas prices have suddenly skyrocketed in the Midwest:
Gas prices are above $4 a gallon at many stations across Minnesota, and experts believe the high prices could last at least a month.
AAA tells KSTP two large refineries in the Chicago area closed, which has decreased some of the supply in the Midwest.
The switch to summer grade fuel is also causing a spike in prices, and some experts say it could be linked to unrest in the Middle East, which impacts the price of crude oil.
According to AAA, the highest average price on record for the state is $3.98, which was in 2008.
We normally have relatively inexpensive gasoline in the Midwest, but this week we actually outstripped California. USA Today calls this “a rollercoaster year” for drivers, and notes that prices are breaking records in this part of the country. Refinery capacity is once again the issue:
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.
Gas prices in Minnesota, Iowa, Missouri, North Dakota, South Dakota, Nebraska, Ohio, Oklahoma and Wisconsin have spiked up to 40 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.
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.
In Minnesota, regular, unleaded gas averaged $4.15 a gallon heading into the weekend — an all-time state record. That makes Minnesota the priciest state in the continental U.S., overtaking California, averaging $4.06 a gallon. In oil-rich North Dakota, prices average $3.98, also a record-high.
We’ve repeatedly noted the issue of refinery capacity and its lack of expansion over the last 30 years. A major new refinery will be built in North Dakota to handle the huge deposits of crude being extracted, but until it opens, shortages in refined product will continue to occur — and price spikes, too.
And that’s bad news for the national economy, too, since these shortages will likely drive prices up nationwide:
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.
Don’t forget that gas prices have a multiplier effect, too. Any products that come to market via truck — such as produce, especially — will start costing more in the grocery stores. That will drain even more disposable income from households and leave a lot less money for luxuries.
It’s going to be a long, expensive summer — and don’t be surprised if Midwesterners opt for more “stay-cations” during it.