Posted in: Gas Prices,
by Patrick DeHaan on Dec 2, 2011 11:06 AM
The lower gasoline prices were nice while they lasted- but all that is poised to come to an end after an upbeat unemployment report and news of Sunoco shutting its Marcus Hook, PA refinery ahead of schedule.
Unemployment fell to its lowest since March 2009 to 8.6%, viewed as a positive sign of economic growth, which generally means more gasoline and overall oil consumption. Gasoline futures soared after the unemployment figures, but also rose sharply because of the immediate closing of a Sunoco facility in Marcus Hook, PA that has a healthy capacity of nearly 200,000 barrels per day. The facility is closing as it loses money. How the heck could that happen, you ask? The facility relies on imported crude- which is more expensive- and with the downturn in gasoline prices the last few weeks, they've been losing money on a daily basis. This pales in comparison to refineries that are doing quite well in the Great Lakes and the Plains.
In fact, I'd say that the large difference between crude prices is to blame- Canadian Sour in the Great Lakes is likely only $75-$85, while Brent crude is $110-$115! There's a significant gap there... refineries that process Brent crude would need to sell their gasoline for $115-$120 per barrel to be profitable, but gasoline is only selling for $105/bbl, meaning a profit if you're refining cheaper oils, and a loss if you're refining more expensive oils. Not all refineries can handle all types of oil, which is part of the reason Sunoco is also looking to close its Philadelphia plant in 2012.
All this behind us, what does it mean for gasoline prices? Quite simply downward pressure has disappeared, and currently there is much more upward pressure on prices, which is the way they will start to head. So watch out Americans and Canadians! Gasoline prices will slowly start to rise.