Minnesota motorists get gas pains
Welcome to spring: higher gasoline prices have been clobbering Minnesota since two large Chicago-area refineries shut down for extended maintenance.
The price of a gallon of regular gas averaged $3.42 on April 21. On Friday morning it was $4.15 at most Detroit Lakes gas stations.
“Yeah, we’ve been hearing from the customers — I’ve been hiding in the office,” joked Lynn Westphal, assistant manager at Cenex in Detroit Lakes. All the counter personnel can say is “it’s not our fault, it’s out of our hands,” she said.
It’s not good for gas stations when gasoline prices spike, said Tyler Kalberer, manager of the Tesoro station on County Road 6 and Highway 59.
“The biggest misconception is it’s the local gas stations driving up the price,” he said. But higher gas prices actually cost gas stations more in the fees they pay to credit card companies when customers pay with credit.
“We make the same pennies (of profit) on $1 a gallon gas as we do on $4 gas,” he said. “I’d love to see $1 gas.”
The higher gas prices cut into discretionary spending for pop, food and other items at the store, which also eats into revenue.
“It’s hurting us, too,” he said.
“We’re seeing some pretty amazing increases across the Midwest,” said Gail Weinholzer, director of public affairs for AAA Minnesota.
In the spring and the fall, refineries switch from winter-grade fuel to summer-grade fuel, then back again.
Nothing unusual about that. It happens every year.
“Winter-grade fuel helps cars start in the winter, but it doesn’t burn as clean,” she said. “Summer-grade burns cleaner but it costs more to refine.”
Refineries take advantage of the switchover periods to do routine maintenance. Nothing unusual about that, either.
But this time, a BP refinery and an Exxon-Mobile refinery, both very large and both located in the Chicago area, shut down for longer than usual for extensive maintenance, Weinholzer said.
“They are two of the largest refineries in the country, as well as major provides to the Midwest,” she said.
They are closed through Memorial Day at least and perhaps as long as July 4. That’s very unusual. And they aren’t saying why the extensive maintenance is needed this year.
“It’s a private corporation situation, they don’t share that with the public,” Weinholzer said. They also don’t coordinate refinery closures, she added.
“We try to encourage corporations not to collude (to set gas prices). This is unfortunately a down side to that situation.”
A smaller refinery in Kansas is also having production problems, she said.
But the two Chicago refineries are the major problem. Even when the maintenance work is finished, restarting a massive, aging refinery is not like flipping on a light switch, she said.
“It takes time to ramp up, refill supplies, and get the glitches out of the way,” she said. “We do not expect a significant decline in Minnesota (gasoline prices) prior to mid-June or July 4.”
She doesn’t expect big price spikes to continue, but smaller increases will likely occur, she said.
“Any time you constrict supply, price advances,” she said. “It’s not a Memorial Day weekend phenomenon— if you look at our (online) map, our friends in the south and southeast (United States) are enjoying relatively low prices all the way up the East Coast.”
Kalberer, the Tesoro manager, said gasoline prices may remain elevated for a while, but he doesn’t believe the spike will last until July. Market forces should start bringing gasoline in from other parts of the country. “It’ll trickle in, I hope,” he said.
Generally speaking, the various gas station owners in this area buy from the same refineries.
“Different companies add their own detergents and blends, everybody puts in their own stuff, but it all comes from the same refineries,” he said. “It just puts pressure on everything else.”
The West Coast and upper Midwest have the highest mainland gas prices now, although it is averaging $4.35 a gallon in Hawaii.
U.S. Sen. Amy Klobuchar has asked the U.S. Department of Energy to investigate the steep increase in gas prices.
She said temporary refinery closures shouldn’t have so much impact on gas prices.
Klobuchar called on the Department of Energy to thoroughly examine the closures and timing of scheduled maintenance operations to prevent future supply shocks that cause gas prices to rise.
“This spike in gas prices is hurting families, businesses and farmers across Minnesota and disrupting commerce,” Klobuchar said. “Scheduled maintenance at refineries should not be allowed to cause such major disruptions in supply.”
U.S. Sen. Al Franken agreed.
“I’m currently working with the Department of Energy to explore whether there’s a way to make sure that we can avoid having multiple temporary refinery closures in the same area of the country — which is part of the reason why we’re seeing the spike in gas prices.”