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Pump prices may spike near $3 per gallon

Marie Havenga • Nov 3, 2017 at 8:00 AM

Spring Lake resident Gloria Draeger just returned from a railroad trip through the Canadian Rockies. She only had to use enough gas to get to the Grand Rapids airport and back.

Draeger said she doesn't have any road trips planned for the near future.

She's lucky. Gas prices are expected to climb their own mountain as early as today (Friday) — up to almost $3 per gallon.

That's on top of Monday's hike to more than $2.60 a gallon at local stations.

As Draeger fueled her silver Chrysler 300 on Thursday afternoon, she said she feels fortunate to be sticking around the Tri-Cities area.

“I feel sorry for the people who have to drive long distances to get to work,” she said.

Patrick DeHaan, head of petroleum analysis for GasBuddy.com, said wholesale fuel prices rose about 50 cents per gallon this week.

“Wholesale gas jumped Monday, Tuesday and Wednesday of this week, so we're kind of waiting for another price increase,” he said Thursday.

DeHaan expects the pump prices to jump to $2.90 or $2.99 as early as today (Friday).

“Some gas stations in Grand Rapids jumped to $2.89 (on Thursday), but it was kind of short-lived because their competitors didn't follow,” he said.

The reason for the price hike this week is three-fold:

(1) This is the time of year refineries carry out normal maintenance. But, because of Hurricane Harvey, some refineries delayed scheduled maintenance so they could continue to produce full quantities of gasoline during and after the storm. “Those refineries that delayed maintenance are doing maintenance now, and those that planned maintenance now are doing maintenance,” DeHaan said. “There's a lot of maintenance taking place.”

(2) The second problem is that the Explorer Pipeline, which runs from the Gulf Coast to the Great Lakes with a capacity of 700,000 gallons per day, sprung a leak last week and partially shut down. “Repairs are underway, but it was still shut as of (Wednesday) afternoon,” DeHaan said. “It's the 'go-to' pipeline that we rely on.”

(3) The maintenance and pipeline leak have led to a third problem — low inventory. “Gasoline inventories are at a two-year low,” DeHaan said. “To add insult to injury, there was a refinery on the market looking for gasoline. Normally, refineries have adequate supplies of three weeks. If a refinery enters the market to buy gasoline to cover its contracts, that kind of spooks the market. The market is really tight right now on gasoline and we're paying the price.”

The Explorer Pipeline is expected to be fixed within days, which should offer “a smidgen of relief,” according to DeHaan.

“It takes 11 days for gas from the Gulf Coast to make it up to the Great Lakes region,” he said. “I wouldn't expect significant relief for a couple of weeks.”

DeHaan is fairly confident gas prices won't hit $3 per gallon in West Michigan, although some Chicago pumps could.

“We're pretty close to the top,” he said. “If we do see prices go up (today), that would be the highest price we've paid since August 2015 when the BP refinery went down in Whiting, Indiana.”

For the long term, DeHaan said we can't expect this winter's prices to be as low as recent winters.

“We don't expect any prices under $2 a gallon,” he said. “Last November, OPEC met and decided to cut oil production. That kind of changed things permanently.”

But he doesn't expect cold-weather fuel prices to jump over $3 per gallon, either.

“During winter, we tend to see the year's lowest prices,” DeHaan said.

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