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Gas up Before the Weekend

Taylor Muckerman
October 5, 2012

Evidence of the influence that refiners' activities have over the price of gasoline at the pump has been on full display in the U.S. the past few weeks. Across the country, prices have been creeping up as the crack spread – the margin between what price refineries purchase crude at and what they sell it for as a finished product – has risen to $30.45/barrel. This figure is greater than three times the five-year average of $8.51. Contributing factors to this outsized spread have included refinery maintenance schedules, unforeseen mishaps, and shutdowns of entire plants. When supplies are tight, events such as these expose this relationship even more.

While the U.S. is becoming less and less dependent on oil imports, disruptions in international refining capacity, especially in Canada and Europe, can have a dramatic effect on the prices that we pay. Maintenance in both of these areas has pushed gasoline inventories along the Atlantic coast to 12-year lows. The largest refinery in Europe, run by Royal Dutch Shell (NYSE: RDS-A  ) , has taken the key out of its Netherlands-based operations for scheduled maintenance. Almost in tandem, Valero (NYSE: VLO  ) decided to work on its Pembroke refinery in Wales for eight weeks. Add to this recent supply disruptions at refineries in California,