Michigan is expected to pay higher prices for gasoline after a refinery fire in Ohio caused prices in neighboring Indiana to post the largest overnight increase of any state, with Ohio itself and Michigan poised to follow.
Average prices at the retail pump jumped nearly 6 cents a gallon in Indiana, home to a major fuel hub supplying the upper Midwest, according to data from auto club AAA. The rise followed higher wholesale and rack prices, which surged by as much as 40 cents a gallon in some areas of Indiana, according to price reporting agency Opis. Spiking wholesale costs in nearby Ohio means retailers there will likely raise prices in the coming days, and Michigan may see an acceleration of retail gains already underway.
In Michigan, the average cost of a gallon of unleaded gasoline was $3.881 on Friday, up slightly from $3.869 on Thursday and $3.814 a week ago, according to AAA Michigan. The national average was up to $3.689 on Friday, after declining for 100 consecutive days.
The increases at the pump are a further burden to consumers and businesses and contribute to a rise in the national average that snapped a 98-day slide earlier this week. Retail prices typically fall at this time of year after the peak summer driving season and as most of the country switches to cheaper winter-grade fuels. The counter-seasonal price increase is the kind of inflationary force the Federal Reserve aims to tame with its latest interest-rate hike.
Changes in gasoline prices impact consumer confidence, and rising prices have an "outsized economic impact beyond their direct hit to gasoline demand," said Mark Finley, an energy fellow at Rice University's Baker Institute of Public Policy in Houston.
While the country's energy infrastructures have been so far spared by major hurricanes this season, refineries in the Midwest and on the West Coast have reported a series of outages in recent weeks, pushing prices higher. The fall refinery maintenance season currently underway could cut Midwest stockpiles further from the record low seen earlier this month.
Unlike the California market, the Midwest is directly connected to fuel makers on the Gulf Coast via the Explorer pipeline, which delivers fuel directly into the Buckeye Complex, a storage hub in Hammond, Ind.. The pipeline froze nominations shortly after the fire, according to TACenergy, meaning demand to ship on the line is nearing the pipeline's capacity.
BP Plc said two of its workers died in the fire at its oil refinery in Oregon, Ohio.
The fire was extinguished Tuesday night and the refinery, which supplies the Midwest with gasoline and diesel, has been shut, company spokesperson Megan Baldino said in an email. She did not elaborate on the extent of the damage or which units were impacted.
The refinery is one of the oldest in the U.S., originally built in 1919. This is the second fire since late August at two of BP's three U.S. refineries. The blaze began early Tuesday evening at the plant's largest crude unit, according to Wood Mackenzie's Genscape.
Staying current is easy with Crain's news delivered straight to your inbox, free of charge. Click below to see everything we have to offer.
With a Crain’s Detroit Subscription you get exclusive access, insights and experiences to help you succeed in business.
Helping you succeed in business since 1985.
1155 Gratiot Avenue Detroit MI 48207-2997