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Business, STEM

Gas Prices Are Rising

Gas Prices Are Rising

Torrance-refinery-flares_02182015

Exxon Mobil refinery flares, Torrance, CA (Source: Los Angeles Times)

It’s safe to say that gas prices are on the rise. My last post on this topic, Gas Prices: Are We At The Bottom Of The Trough? , reported that the average price of regular gasoline was $2.03 on January 27, 2015.

Here are today’s averages for regular gasoline in the U.S.:

Today:                 $2.270

Yesterday:           $2.271

One Week Ago:   $2.234

One Month Ago: $2.052

One Year Ago:     $3.372

Source: GasBuddy.com (12:35 p.m. EST)

As shown, prices have risen $.036 in one week, and just about $0.22 in the last month. The good news is that $2.27 still looks like a bargain compared to one year ago.

Since launching A Bridge for Business & STEM  three years ago, one of the categories covered is energy. Volatility in gasoline prices comes under the energy umbrella, and is a topic that is frequently reported on. My personal interest in gasoline prices is what causes movement, up or down, within the market place.

Here are some potential underlying causes to the price increases since January 1st:

Local and national media outlets have been reporting on the explosion at the ExxonMobil refinery in Torrance, CA that occurred on Wednesday morning, February 18, 2015, around 9 a.m. PST. The cause of the explosion is under investigation, however, it appears that it occurred in one of the electrostatic precipitators (ESP) that is downstream from the gas production unit or catalytic cracker. The Torrance refinery processes 156,000 gallons per day of crude, and the unit that was damaged handles 2/3 of this capacity. It could take six months to a year or longer before the investigation and repairs are complete. [Ref 1, 2]

As a result, a local price jump has been seen in the Los Angeles area which is not unexpected. For now, analysts believe that the impact will not spread beyond this area. However, the Torrance refinery explosion comes on the heels of the shutdown of the Tesoro Corp 240,000 barrel per day refinery to the north in Martinez, CA on February 1st.

The impact of the United Steelworkers walk-out at 11 facilities, including nine (9) refineries account for 13 % of the U.S. production capacity and has contributed to some of the recent price increases. [Ref 2] According to Patrick DeHaan, senior petroleum analyst at GasBuddy.com, most of the recent increase in gasoline prices since the first of this year is due to a rebound in crude oil prices.

Coming from a chemical engineer and someone that has experience designing and installing large capital equipment for refineries, utilities, manufacturing operations, etc., photos of the explosion at the Torrance refinery left me speechless. It also reinforced the need for safe operating procedures in industrial operations. Fortunately, only four persons were injured, and no loss of lives has been reported.

Given the challenges of the steelworkers strike, the unscheduled shut-down of the Torrance refinery due to an explosion, and with spring approaching, refineries usually conduct maintenance and upgrades to change blends and prepare for the summer driving season – all contribute to lower gasoline production and a potential rise in prices.

My best forecast for gasoline prices given the above is – dicey! However, I do expect to see price increase above those quoted today. The unknown is how quickly will the run-up be?

Until my next post, let’s continue to bask in the sunshine of lower gas prices. Happy driving!!!

References:

    1. “Explosion at Exxon Mobil refinery in Torrance, California, injures four”, by Nichola Groom for Reuters, http://news.yahoo.com/refinery-blast-sprays-ash-forces-students-shelter-place-183458824–finance.html;_ylt=AwrSbgxzG.ZUHGkAymNXNyoA;_ylu=X3oDMTEzZWgzbmFmBGNvbG8DZ3ExBHBvcwMxBHZ0aWQDVklQMzAxXzEEc2VjA3Nj
    2. Updated: Los Angeles Refinery Explosion, by Patrick DeHaan, GasBuddy.com, February 18, 2015, https://blog.gasbuddy.com/posts/UPDATED-L-A-refinery-explosion/1715-601403-2896.aspx
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About Vi Brown

Vi is principal and CEO of Prophecy Consulting Group, LLC, an Arizona firm that provides business and engineering services to private and public clients. Prior to establishing her consulting practice in 2001, Vi worked with Motorola, Maricopa County Government, Pacific Gas & Electric, CH2M Hill, and Procter & Gamble. As an adjunct faculty member, Vi teaches undergraduate calculus classes and graduate level environmental courses. She is also a professional speaker.

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