Refineries Were Born To Run
Every day we sweat the gas price out on the streets of a runaway American dream, at night we ride through at the mercy and glory of these refining machines. Prices are rising out on highway 9, chrome wheeled, fuel injected, and prices continue to climb. Oh, baby, this gas rips the bones from your back. It's a death trap; it's a suicide rap. We gotta get out while we're young. `Cause tramps like us, refineries were born to run.
1-2-3-4! The highway's jammed with broke drivers on a last chance power drive. Everybody's out of gas tonight and there is no place left to hide. Together perhaps we can live with the gas price, before the effect on growth takes its toll. Oh, someday soon, I don't know when, we're going to get to that place where we can power our cars with the sun! But till then, tramps like us, baby, refineries were born to run.
A surprise increase in refinery runs was not enough to overcome fears of more refinery shut downs and glitches as refineries close and run below historical norms. Refiners are not running. With gas prices already at their highest level since August, refinery outages, scheduled maintenance and plant closures in North America and Europe have increased supply fears further. We saw a spike when ConocoPhillips planned to shut the fluid catalytic cracker at its Bayway refinery in New Jersey, not to mention the earlier closures of a couple of Pennsylvania refineries and the closure of the big Hovensa 350,000-barrel-a-day St. Croix plant in the U.S. Virgin Islands. Still, gasoline paused a bit when the Energy Information Agency reported that U.S. refiners operated at 82.8% of their operable capacity last week, which was higher than expected, especially against a backdrop of poor margins and a Motiva glitch gasoline production managed an increase averaging 8.6 million barrels per day.
Yet a report from Barbara Powell of Bloomberg News demonstrates how sensitive prices are at this time of low runs. She reported that Citgo Petroleum Corp. will shut most of the production units at its refinery in Lemont, Ill. near the end of April for planned repairs. The equipment includes a crude unit, coker, fluid catalytic cracker and alkylation unit, said the people, who declined to be identified because they aren’t authorized to speak for the refinery. The shutdown will occur when gasoline from the Midwest and Gulf Coast will be in demand and the East Coast will need more fuel imports because of refinery shutdowns in Pennsylvania, the Virgin Islands and Europe. The refinery, which serves the Chicago-area market, can process 170,500 barrels a day of crude oil.
So gas prices are in danger of another surge and will have to keep pace with rising oil prices. Oil is ignoring data that China's inflation is rising at a faster-than-expected rate of 4.5% in January from the same time last year, which reduces the chance of a loosened monetary policy. Instead, we are focusing on renewed hopes of a Greek austerity deal. This comes as OPEC crude production hit a three-year high in January as Libya, Kuwait and Iraq boost output. Bloomberg says supply from OPEC increased to 30.9 million barrels a day last month, the group’s Vienna-based secretariat said today in its monthly oil market report. That’s the most since October 2008 and is up from 30.84 million in December. That comes as it cuts its demand forecast by 120,000 barrels a day, to 88.76 million a day. They project that demand growth will slow to 900,000 barrels a day in 2012 from 1 million last year. OPEC’s output levels are exceeding requirements by almost 5%.
Phil Flynn is senior energy analyst for PFGBest Research and a Fox Business Network contributor. He can be reached at (800) 935-6487 or at email@example.com.