Gasoline Prices Spike In Midwest

Bad news for drivers in the Midwest: gasoline prices are spiking again.

While states along the coasts and Gulf have seen only incremental increases so far, CBS News Correspondent Cynthia Bowers reports, states throughout the Great Lakes and Midwest have seen a jump at the pump. Since the beginning of this month, prices in Illinois have gone up 22 cents. Up 21 cents in Indiana and in Wisconsin. Michigan and Minnesota and Kansas have seen their prices rise as well.

"It has been a crazy year," said industry analyst Phil Flynn, Alaron Trading. Prices instead of peaking in July, peaked in May and bottomed in July and now they are moving up into the fall."

During a summer that's seen record demand -- American cars are burning 10 million barrels of gas a day -- the main reason the rest of the country is still enjoying relatively cheap gas is foreign made fuel. Imports of 1 million barrels a day have kept coastal areas well-supplied, but try getting a tanker to Topeka.

According to Tom Kloza, Oil Price Information Service, "They're seeing this jump because they're land-locked. There's plenty of gasoline on a global basis and there's plenty of gasoline in the U.S. coastal markets, but there's only so many arteries that can deliver that gas."

And so the new jump at the pumps is the result of a decline in refinery production in the region, capped off by a fire at a key Illinois plant that could dent production for more than six weeks.

"The industry was holding back supply just as demand for fuel started rising. And now we have a total refinery outage in Illinois," said AAA spokesman Geoff Sundstrom. "We're in a situation where Midwest states seem to be tight for fuel."

Gasoline prices in Illinois and Wisconsin are 17 cents higher than the national average, according to the AAA daily survey of 60,000 service stations.

Prices in Michigan, Ohio, and as far away as Oklahoma have also risen roughly 20 cents in the past four weeks, with the biggest increases in recent days.

The rising prices follow a reduction in output by refiners in the region trying to counter weak profit margins. And last week, a major refinery run by Citgo in Lemont, Illinois, was shut down due to a fire.

"A lot of the upward direction seems to be coming from fears over what might happen to supply as a result of the refinery fire" said AAA spokeswoman Norma Cooper in Chicago.

Citgo has predicted that the refinery, which has a capacity to produce 160,000 barrels of refined products every day, will be shut for no less than six weeks.

Last year's spike to as high as $2.75 a gallon in some Midwest cities was spurred by the shutdown of a key pipeline bringing the fuel up from Texas and Louisiana. The hike triggered a federal investigation into price fixing, which eventually found no wrong-doing by oil companies.

This year's higher Midwest gasoline prices have begun nudging the national average pump price higher, up about 3 cents since midAugust at $1.44 a gallon, according to AAA.

Demand meanwhile, is expected to rise in the run up to the Sept. 1 Labor Day holiday, the official end to the summer driving season.

Roughly 27.7 million travelers will take to the roads for trips more than 50 miles from home on the Sept. 1 holiday weekend, up from 27 million last year, according to survey by the AAA.

"Although the U.S. economy continues to struggle, holiday travelers are determined to end the summer on a high note," said AAA Travel Vice President Sandra Hughes in a release.


© MMI, CBS Worldwide Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. Reuters Limited contributed to this report
  • CBSNews.com staff CBSNews.com staff

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