Gas prices in Louisville high thanks to struggling refineries - Courier Journal

Gas prices in Louisville high thanks to struggling refineries

Heatwaves around the country are driving up gas prices in Louisville as refineries struggle
Medora Lee Ana Rocío Álvarez Bríñez

The heatwaves continuing to blister most of the country are causing gas prices to rise with the temperature, including in Louisville, experts say.

Spokesperson Lynda Lambert told The Courier Journal on Tuesday that prices have risen lately not only because of the typical high summer demand, but the rising price for crude oil and recession fears. Tom Kloza, global head of energy analysis at Oil Price Information Service, said high temperatures around the country have forced some refineries in Southern states to decrease production, which also causes pain at the pump.

The average price for gas in Louisville this summer has surpassed last year's average as gas prices continue to soar across the country, officials at AAA East Central said Tuesday.

"This is the actually the first time that we've been able to say our prices here in Louisville are higher than they were this time last year in a very very long time," Lambert said.

Average prices for gas around Louisville stand at around $3.88 per gallon, roughly 18 cents higher than last year.

The national average for a gallon of regular unleaded jumped 13 cents last week to $3.71, an eight-month high, according to AAA. But last year still stands as a record-breaking year for gas prices, as gasoline reached $5 across the country last year due to the war between Ukraine and Russia, Lambert said.

Why is gas going back up in 2023?

Lambert said heat waves around the country were also affecting refineries. The barrel of crude oil was $81 on Tuesday, and between $84 and $85 a barrel last week compared to just $50-60 earlier in the year.

“We are seeing refiners in Texas, Louisiana, Tennessee and some other states struggle to run anywhere near at maximum rates,” Kloza said. “Petroleum engineers can tell you that when ambient temperatures get to the 100-degree neighborhood, it is difficult to run at maximum levels.”

Nationwide, refinery utilization decreased by 0.9 percentage points from last week to 93.6%, De Haan said. Gasoline production fell to 9.5 million barrels per day, and distillate fuel production dropped to 4.8 million barrels per day last week.

West Coast refineries posted the largest drop (2.4%) to 90.9%, followed by the Gulf Coast’s 1.5% decline to 93.3% and the Midwest slid 1.1% to 97.7%, he said. The last two regions – Rocky Mountains and East Coast – each rose.

“These percentages show how much of a region’s overall capacity was used to refine oil,” De Haan said. “It’s important to note these percentages because the lower the utilization percentage, the lower output, which has a direct impact on local gasoline prices.”

Is the price of oil going to go up?

Oil prices, the largest single contributor to gas prices, rose $10 per barrel in July to a three-month high last Tuesday. “Raw crude price increases add 24 cents per gallon to the price of gasoline and other refined products,” Kloza said.

Production cuts from the Organization of the Petroleum Exporting Countries (OPEC) and its allies and sanctions on Iran, Venezuela and Russia shifting global crude supply are all affecting supply and boosting prices, said Natasha Kaneva, J.P. Morgan’s head of global commodities strategy.

Exports also cut into our supply at home. “We are exporting about two cargoes of gasoline (mostly from the Gulf Coast) for every cargo we import,” Kloza said. “We are the supplier of choice for Latin America, which has no additional refining capacity coming up this year.”

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Are gas stations just gouging?

Retail gasoline margins are around 27 cents per gallon now, or about one-third of what they were a year ago, Kloza said. “Thanks to higher wages and other costs, most retailers need something above 30 cents per gallon in order to maintain reasonable fuel profits,” he said. “So for now, the beneficiaries of the return of inflation to energy prices are producers of crude, and refiners, but not retailers. They are the messengers blamed for the message.”

Will gas prices drop any time soon?

In the short-term, prices may depend on refineries.

“There is the fear of more refinery downtime along with the major fear of a hurricane probability cone in the Gulf of Mexico,” Kloza said. “If those fears are removed, we will see substantial gasoline price drops, even if crude oil remains above $80 per barrel.”

U.S. West Texas Intermediate (WTI) crude was last at $79.67 per barrel and world benchmark Brent was at $83.81. Both are on track for a fifth weekly gain.

Reach Ana Rocío Álvarez Bríñez at abrinez@gannett.com; follow her on Twitter at @SoyAnaAlvarez. Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday.