As temperatures east of the Mississippi rise above 90F with some temps surging into the triple digits, utility companies are having a difficult time keeping up. This has the potential to disrupt gasoline production as refineries cut back energy consumption or suffer from power loss, like a Citgo refinery in Northern Illinois.
Power outages or reduced production has occurred at refineries on the East Coast, in New England, and in the Midwest as a result of record high power demand. Some refineries have voluntarily reduced power usage while some had no choice and lost power.
The record heat also threatens to reduce above average supplies as utilities use back up power supplies that consume petroleum products to meet demand.
The result from the record heat could include: lower supplies, lower production, higher demand, shortages, and shutdowns. Unfortunately for motorists, every single one of these situations has the potential to raise prices, so I'm hoping that this situation is short lived.
On the market today, wholesale prices have advanced the most in the Chicago market- as I mentioned a refinery suffered from power loss- but all regions of the country are seeing large gains in wholesale prices.
The only good news for motorists is that prices may continue falling as even with today's gains, wholesale gasoline prices remain over a dime below where they were a few weeks ago. This will mean that prices will continue to fall, but they will not drop as low as previously anticipated.
Tomorrow we'll see the DOE report released just before noon. It'll be a pivotal report that will provide a brief glimpse into demand and supply numbers over the holiday weekend.