Kristi King, wtop.com
WASHINGTON – Gas supplies on the East Coast could get tighter and prices could rise even more as refineries shutdown.
Couple the closures with rising geo-political tensions and tighter supplies and gas prices in the D.C. metro region also could soar 50 cents or more higher than national averages, according to PFG Best Research Senior Market Analyst Phil Flynn.
Since September 2011 two refineries have closed in the Philadelphia area, and a major Caribbean export refinery serving the East Coast also has closed.
Now there are plans to close the Sunoco Philadelphia refinery in July if no buyer is found. That refinery alone was responsible for nearly a quarter of the refinery capacity on the East Coast in 2011.
What’s causing the refineries to close? They’re not making any money. Crude oil prices are up. Demand for gas is down. The Environmental Protection Agency is implementing number of new regulations that require them to make cleaner fuel, new blends of gasoline and low sulphur heating oil.
Crude oil prices are high for numbers of reasons. Flynn says tensions in the Middle East for example have added at the very least a $20 risk premium to the cost of crude oil. That in turn translates to at least another 50 cents a gallon for gasoline at the pump, he says.
Federal Reserve efforts to stimulate the economy also are causing the cost of crude oil to rise. Flynn says you can think of the Fed’s quantitative easing as printing more dollars at ultra low interest rates. The value of the dollar drops and it then takes more money to buy commodities such as crude oil.
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