Indiana Refiner Breakdown Sends Midwest Gas Prices Soaring

Crude unit at Midwest’s largest refinery could be out of service for up to a month, leading to regionally high wholesale prices.

August 13, 2015

WHITING, Ind. – Leaking tubes on a piece of equipment at a BP refinery in Whiting, Indiana, forced a shutdown of the largest crude unit at the Chicago-area refinery earlier this week. According to news reports, the unit could be down for at least a month, and the Midwest region is already feeling the effects, with wholesale gasoline prices in Chicago at the highest level since 2013.

“It’s such an important refinery smack in the middle of the Midwest,” Phil Flynn, senior market analyst at Price Futures Group in Chicago, told Bloomberg news. “It’s like dropping a bomb in Chicago and watching the shockwaves ripple out to the rest of the country.”

Gas stations in Illinois, Indiana, Michigan, Ohio and Wisconsin get most of their fuel from the Whiting plant, which is the largest refinery in the Midwest. It is currently operating at less than half of its 430,000 barrels-per-day capacity. For now, gas stations in the region are being forced to source their fuel from refineries that are much farther away.

BP’s Whiting refinery can process as much as 270,000 barrels a day of heavy crude sent by pipeline from Alberta, Canada, with additional supply shipped up from Cushing, Oklahoma, the U.S. storage hub. BP oil traders have offered to sell a variety of heavy Canadian crudes, according to market participants cited by Bloomberg. Western Canada Select, a proxy for crude from Alberta’s oil sands region, fell 20 cents to $19.50 below U.S. benchmark West Texas Intermediate, according to Bloomberg data.

Wholesale gasoline in Chicago jumped by 82.5 cents a gallon earlier this week, to an 80-cent premium to futures and pump prices are expected to follow.

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