OAKBROOK TERRACE, Ill. — Even as gasoline-price volatility evaporates to a virtual flat line, a Midwest retailer said the one-day spike in wholesale costs that occurred last week in his region was the largest he’s ever seen—66 cents a gallon—where 12 cents a day earlier would have been considered a significant jump.
Speaking to CSP Daily News on condition of anonymity, two Midwest retailers said the historic jump caught everyone by surprise. Gaithersburg, Md.-based GasBuddy.com recently pointed to the emergency shutdown of a unit in BP’s Whiting, Ind., refinery, as a likely cause, but one Midwest retailer said that refinery only handles 10% of the market’s volume.
He said low gas prices also have spurred demand in recent weeks, forcing all refiners to run at capacity. “It’s like how the airlines run today,” he told CSP Daily News. “There’s no empty seats,” so in the case of fuel supply, any disruption can have an adverse effect.
At press time, wholesale prices had reportedly eased by as much as 30 cents per gallon upon news that the affected refining unit would be operational much sooner than expected, according to Gainesville, Ga.-based Mansfield Oil Co.’s Fuels News.
When the price hike hit last week, the first retailer said the market took two or three days to move. “Nobody wants to be that far out of the market,” he said.
The spike last week came from the actual Chicago spot market, said another Midwest retailer, noting the shutdown of the 240,000-barrel-per-day BP unit. The London-based major oil company had to go out on the open market to secure product, which pushed the prices up, he said. Although it was one oil company doing most of the buying, all of the other oil companies moved their rack prices based on the shift in the spot market, he said.
“Typical” though still dramatic swings of four to six cents in a single day come and go without attracting headlines, the second retailer said, but when a refinery goes down, the average spike in the past was only about 12 cents.
Over the next few days, wholesale prices did ease up, confirmed a third retailer, Sam Odeh, CEO of Power Mart Corp., Elmhurst, Ill. At that point, operators took better margins to recoup losses and prepare for future uncertainty, he said.
“Yes, we made money—for two days … and for those of us who had inventory,” Odeh told CSP Daily News, “but we received no direction from the oil companies. We didn’t know if we would have supply. People only see a dollar rise in prices, they don’t understand the supply chain.”
The unexpected shutdown caused panic in the market, said Patrick DeHaan, senior petroleum analyst for gas-price monitoring service GasBuddy.com. In a blog post, he said Illinois, Indiana and Michigan were at the center of the hikes, where street prices rose by more than 50 cents in a few days. Ohio, Wisconsin and Kentucky saw hikes of 25 cents, while Minnesota, Oklahoma, Missouri, Kansas and Iowa saw prices jump more than 10 cents a gallon.
On the other hand, prices were lower in 30 states, with Midwest prices expected to ease as supply reached the region and crude prices continued to float downward, DeHaan said.