Oil price drops might get hampered due to Refinery woes

The prices of oil might be getting at an all-time low but that might not be the case everywhere. Recently, the oil prices fell to $40 per barrel, which is the lowest in six years; the drivers around many places are enjoying the same benefits as the others. Although most drivers across US are spending 25 % less on fuel than last year, California based drivers have missed out on the reduced prices of oil due to the outage faced by the refineries. It would not be wrong to say that many drivers are saving just less than 10 per cent on gasoline this summer. For example, in Los Angeles, a gallon of regular unleaded costs $3.71 but some stations are charging $5 a gallon.

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The main reason for this biased profit sharing is the hindrance in production. As the production problems spread to more parts of US, the prices of oil also get hiked in cities like Chicago. A situation like this would definitely open up the debate whether some regions are more vulnerable to interruption in production of oil. The present situation might get only worse as many refinery operators are suggesting that they must shut down the operation in big fuel making factories from Illinois to Texas for several weeks as the refineries’ need repairs.

The spokesman of the AAA Michael Green, said, “Gas Prices are not as low as they should be because of unexpected problems at major refineries and strong demand from drivers. Everything has to be up and running at a high utilization because of supply and demand. When you do have something to go wrong, you’re going to see a price spike.” The group also indicated that the national average could fall to as low as $2 a gallon this year, but that could happen only if there were no more production hiccups. The price of oil at the moment might have encouraged the US drivers to take to the road a lot more than usual and to meet that demand the companies have had to produce more.

According to the Energy Information Administration, last week, the US plants processed nearly 17 million barrels of crude every day which amounted to a 540,000 barrel increase over this time last year. It would be interesting to see how the prices of oil will react when many of the proposed refineries shut down for maintenance later this year.