East Coast Refineries Key to Managing Rising Gas Prices

Closing refineries on the East Coast will add the the gas price hikes seen in eastern states.

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Gregg Laskoski is a senior petroleum analyst for GasBuddy.com.

When a confluence of events appears to be working against us it becomes that much more important to recognize early those we cannot control and those we might be able to successfully manage.  

At the moment, war in the Middle East between Israel and Iran is almost a foregone conclusion. U.S. Secretary of Defense Leon Panetta said in recent weeks that he anticipates Israel will launch its attack in "April, May, or June." Iran is not backing down on its pursuit of nuclear weapons and this morning the region's heightened volatility has pushed NYMEX crude oil to $102 per barrel.

[Read the U.S. News debate: Should the United States Consider Military Action to Hinder Iran's Nuclear Program?]

Of course, the prices of different crude oils vary significantly from east to west due to the premium on Brent crude versus the lower-priced Canadian crude made available to western states. But there's more going on here. 

Let's take a look at gasoline prices. The U.S. average price Wednesday is $3.48 per gallon (.35 cents more per gallon than a year ago). In eastern states prices are much higher Wednesday (versus a year ago) than those in the west and the differential in the east between Wednesday's prices versus a year ago is greater too. Here's a sample: Philadelphia shows a $3.61 average price Wednesday (+$0.43 over last year);  New York's $3.90 Wednesday (+$0.46); Atlanta's $3.50 (+$0.45); Baltimore's $3.56 (+$0.50), and Jacksonville's $3.61 (+$0.51) all illustrate what may be just the beginning of a major problem. And one that may be avoidable too.  

[See a collection of political cartoons on gas prices.]

That problem is the dramatic decrease in eastern refinery capacity. Last week the Deptartment of Energy reported eastern refineries were functioning at 55 percent capacity, significantly less than all others, and in December it recognized that refinery closings in the east could be extremely problematic. Contributing to the major decrease in output is Sunoco's decision to sell its Philadelphia refinery (still operating); Sunoco's decision to sell it Marcus Hook refinery (idled);  and Conoco Phillips's move to close its Trainer, Pa. refinery (currently shut down).

Collectively, these three facilities produced more than 700,000 barrels per day of gasoline, jet fuel, heating oil, and diesel, or about 46 percent of the northeast's refining capacity.

[See the 10 priciest years in history for gas.]

Wednesday the oil workers from these three refineries meet the press at the Hart Senate Office building in Washington with Sen. Bob Casey, a Democrat from Pennsylvania; U.S. Rep. Patrick Meehan, a Republican from Pennsylvania's Seventh District; and members of the United Steelworkers Union. Let's hope the right people listen to what they have to say.

While our elected representatives in Washington may not be able to find suitable buyers who will operate these refineries, perhaps they'll recognize that this is one of those things the United States could better manage in the public interest. 

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