Iowa Running on Fumes

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Iowa Running on Fumes

DES MOINES, Iowa -- A recent refinery fire in Oklahoma has caused gasoline supplies at two storage facilities in Iowa to see shortage levels; reminding the nation of its tight gasoline inventories ahead of the driving season, and giving evidence for the possibility of average gas prices reaching $3 per gallon, The Associated Press reported.

The shortage was partly attributed to a fire and explosion at a 50,000-barrel per day Gary Williams Energy Corp. refinery in Wynnewood, Okla., which temporarily shut the facility. The situation was made worse when one of the nation's largest refineries -- a 420,000-barrel per day BP plant in Indiana -- stalled production and cut supplies throughout the Midwest.

Because of its location on the edges of the nation's pipeline system, Iowa is particularly susceptible to spot outages in times of shortage, the report stated. Supply shortages at storage facilities in Iowa City and Fort Dodge were expected to be resolved by Tuesday night.

To solve the problem, truckers were recruited to drive to Illinois on Sunday to get gasoline before Iowa stations began running out, Dawn Carlson, a spokeswoman for the Petroleum Marketers & Convenience Stores of Iowa, told the AP.

"My recommendation is that consumers do not panic or get too concerned," Carlson added. "Any type of hoarding or topping off tanks will make matters worse."

While the Iowa City and Fort Dodge storage facilities were expected to receive the gasoline by Tuesday night, other terminals in Iowa and Nebraska could experience temporary outages over the next couple of weeks, according to Bruce Heine, a spokesman for Magellan Midstream Partners, operator of an 8,500-mile refined products pipeline system that includes 47 storage terminals.

Other refinery issues across the nation have kept gasoline inventories slim. The Energy Department released data last week showing an unexpected drop of 2.8 million barrels in nationwide gasoline inventories, as refinery utilization declined to roughly 88 percent of capacity, the report stated.

Anymore supply problems before the start of summer will cause the national average for gasoline to pass the $3 mark, according to industry analysts. Currently, AAA reports the price for a gallon of regular, self-serve gasoline is $2.97 -- six cents short of last year's record national average of $3.03 seen in August, and five cents more than the year-ago price.

"We're in big trouble," Phil Flynn, an analyst at Chicago-based Alaron Trading Corp., told the AP. He noted inventories stand at 194.2 million barrels -- slightly above the levels reported in the days after Hurricane Katrina hit the Gulf Coast in 2005 -- and predicted that the average prices this summer will surpass the 2005 record of $3.06 a gallon.

To meet demand and offer a cushion to offset potential disruptions, gasoline inventories will need to rise to 210 million barrels by Memorial Day, according to Flynn.

"There's a fear built into the market that there won't be enough gasoline for the summer driving season," said Eric Wittenauer, an energy futures analyst at A.G. Edwards & Sons in St. Louis.

However, industry players were less concerned about shortages.

"We've got a pretty sophisticated supply and distribution system in this country," said Charlie Drevna, executive vice president of the National Petrochemical & Refiners Association. "We're pretty good at adapting and getting fuel to the areas where they need it."

Lucian Pugliaresi, analyst for the Energy Policy Research Foundation Inc., told the AP that while the situation appears to be improving, "a combination of a lot of different things have gone bad in the last couple of months." For example, a 170,000-barrel per day facility in McKee, Texas, is in the process of restarting after shutting down for a month. Meanwhile, a 470,000-barrel per day plant in Texas City is operating at less-than-half capacity. In addition, a ConocoPhillips' refinery in Sweeny, Texas, was partially shut down Saturday due to power outages.

"When there's not as much product refined and consumption rates are historically high, outages are going to pop up -- especially in the outer reaches of the pipeline systems," said Randy Lusby of Maryland-based Oil Price Information Service.