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Gasoline prices shoot up across US, more increases expected as refineries remain shuttered

  • Gasoline at the pump should reach an average $2.50 per gallon nationally by Labor Day, from an average of $2.40 per gallon of unleaded Wednesday.
  • Whether gas prices go much higher depends on how long refineries are shut down and whether any have sustained longer-term damage.
  • Deliveries from the Gulf Coast have slowed, and drivers should see gasoline prices rise in many states east of the Rocky Mountains, including in the Southeast, Mid-Atlantic and Midwest regions.
People use an Exxon gas station in Brooklyn, New York.
Getty Images
People use an Exxon gas station in Brooklyn, New York.

Drivers could pay an average $2.50 or more per gallon at gas pumps across the U.S. by Labor Day, and prices could go even higher if Harvey damaged refineries on the Gulf Coast.

Prices jumped 3 cents a gallon at the pump nationally for unleaded gasoline between Tuesday and Wednesday, according to AAA, and the $2.40 per gallon average is now up 6 cents from where it was a week ago.

More than 30 percent of U.S. refining capacity has been affected by Hurricane Harvey, which has caused unprecedented flooding across Texas and was dumping rain on Louisiana Wednesday. A number of pipelines that move gasoline to regions outside the Gulf Coast area are reporting limited capacity or closures, restricting deliveries of fuel to many parts of the country.

Rising prices will hit consumers in time for the holiday weekend. "I'm expecting it to go up at least another 10 to 15 cents a gallon from where it is today," said Andrew Lipow, president of Lipow Oil Associates.

Lipow said prices across the U.S. will be affected, especially in areas east of the Rocky Mountains. Lipow said the shutdowns and slowdowns at Gulf Coast refineries have resulted in a reduction of crude oil processing of more than 5 million barrels a day. Normally, the U.S. refines 17.5 million barrels a day of crude, turning it into gasoline, diesel and jet fuel.

"Supplies are rapidly tightening. Key supply pipelines are struggling and we could see spot shortages as far away as the upper Midwest and particularly the Southeast," said John Kilduff, an energy analyst with Again Capital.

Many states have seen increases in keeping with the national average, but prices have spiked higher in some locations. Drivers in North Carolina, for instance, are paying 10 cents more per gallon than a week ago. For South Carolina drivers, the price is 13 cents higher for a gallon of unleaded, according to AAA. The Colonial pipeline services that area, and it reported lower volumes.

In Indiana, prices jumped 5 cents from Tuesday, to $2.41 per gallon, and in Ohio, overnight prices were steady at $2.30, but the price is 10 cents higher than a week ago, according to AAA. In Michigan, prices jumped 6 cents Tuesday to $2.51, and in Kentucky, the price was 9 cents higher than Tuesday at $2.38 per gallon.

"The price rise at the pump has only just begun," said Kilduff. "It'll be a startling but brief price hike." Kilduff believes gasoline could rise by 85 cents, should any of the refiners have more lasting damage.

Gas prices in Texas are up slightly statewide because so many drivers were unable to move their vehicles during the storm. But in Dallas, unleaded gasoline was $2.31 per gallon on average Wednesday, up from $2.14 a week ago, according to AAA.

There are no major reports of damage at refineries, though there were reports that Exxon's Baytown refinery had some flood damage. Port Arthur, Texas-based Motiva, the largest of U.S. refineries, capable of processing more than 600,000 barrels a day, joined the list of shutdowns.

The loss of Motiva will have a big influence on the market, Kilduff said. "It could be the tipping point in terms of generating the spike higher we're seeing."

While prices at the pump rise more slowly, gasoline in the futures market snapped higher Wednesday. The RBOB gasoline contract for September rose more than 10 percent in the past two sessions, reaching $1.92 per gallon in New York trading. Kilduff notes the September contract expires Thursday, and that could create even more volatility in the futures market.

The storm's effect on refineries will become more clear in coming days, once workers are able to return and flood waters subside.

"Everything in Beaumont [and] Port Arthur is up in the air. They might have a major flooding event, and Total's refinery in Port Arthur lost power," said Lipow.

The storm came ashore first near the Corpus Christi refining center, and some refineries were moving toward restarting.

"Corpus Christi refiners should be returning to operations in one to two weeks, while in Houston I think it's going to take two- to two-and-a-half weeks to fully recover," said Lipow.

In Corpus Christi, the Flint Hills refinery, which can process 300,000 barrels a day, is expected to restart in the next few days, and Valero's similar-sized refinery is also getting ready to restart. Citgo has said it is preparing to restart its Corpus Christi refinery in the next few days.