Drought, refinery problems fuel hike in gas prices

Published 12:00 am Wednesday, August 15, 2012



LAPLACE – An onslaught of refinery problems in other parts of the country, coupled with the severe drought in the Midwest and central U.S., are boosting gas prices nationally, and the effects are starting to be felt closer to home.

The average retail price for a gallon of gas in the New Orleans area has risen by more than 7 cents to an average of $3.52 as of Tuesday. That figure is 20 cents higher than prices were at the beginning of the month, according to price analyst Don Redman of the American Automobile Association. The figure is still considerably lower than the national average of about $3.67 per gallon.

Throughout the U.S., the highest average price per gallon Tuesday was in California, where prices pushed above $4.09. The lowest prices can be found in Arizona, where a gallon costs about $3.37. Prices in the River Parishes on Tuesday were as low as $3.45 per gallon and as high as $3.69 per gallon, according to AAA.

Redman said refinery malfunctions and shutdowns on both the west coast and in the great lakes region have not directly affected the region, but it is forcing those regions to use the Gulf Coast as an alternate source for fuel.

“Those markets are not producing what they normally would, so they are having to pull from other markets,” Redman said. “The Gulf Coast is one of those markets.”

Redman also said the severe drought conditions in the Midwest is playing a factor in the increased national average, which has spiked by about 25 cents per gallon in the past month. He said the fate of the corn crop, which is used to produce ethanol, is being watched closely.

“It puts a limit on what the crop can be used for,” Redman said. “It is important in several facets, and fuel production is one of them.”

Continued unrest in the Middle East is also a factor that drives price, Redman said. Political uprisings in Syria and other areas have pushed the price of crude oil back above $90 per barrel.

“At one point this year, the price of crude was as low as $77 a barrel,” Redman said. “That market is news driven, and there are so many unknowns right now. It is hard to tell if those numbers will come back down.”

Redman said prices this time last month were at $3.18 per gallon statewide. Last year at this time, prices were at about $3.50 per gallon. He said there is a possibility of a drop in prices next month as driving season comes to a close, and refineries begin producing their winter blends.