Processing Magazine

Pump prices rise quickly as refiners cut back

October 19, 2009
Many people filling up cars for the workweek are getting a big surprise: gasoline prices have been climbing rapidly. According to the Associated Press, gas prices have now risen for six straight days. The force behind prices at the gas station can be found in the U.S. dollar, which has been falling steadily since the month began, and at refineries that are slashing production. Because oil is bought and sold in dollars, crude essentially becomes cheaper for global investors. How long oil and gas prices continue to move upward is not known, but demand for both remains muted. Refiners must also buy crude that is growing more expensive to make fuel. Prices are rising at a time when people are not driving like they used to. Trucking companies are not carrying as much freight because of the recession and airlines aren''t buying as much jet fuel because business travel is down. So refiners are shutting down operations or starting regular maintenance while sales are slow. A government report last week showed that refiners have slashed production to levels more common in the aftermath of a hurricane, which can disrupt operations in the Gulf of Mexico. Demand is picking up slowly for fuel, but unless there is a big rebound, which few experts foresee, refiners are unlikely to ramp up production.