From New York to Philadelphia, refineries that turn oil into gasoline have been idled or shut permanently because their owners are losing money on them.
Commodities markets are forecasting rising prices. Gasoline futures on the New York Mercantile Exchange are up 22% this year, and settled Friday at a 10-month high of $3.3569 a gallon. Average pump prices tend to follow futures by a few weeks, averaging about 70 cents a gallon more, after taxes and transport costs. Based on futures, retail prices should average above $4 a gallon soon.
Oil and fuel products come into New York by tanker and pipeline. Much of the oil originates in the Atlantic basin from places like Nigeria and the North Sea. It is then refined into gasoline. The East Coast imports gasoline, too, although that is expensive.
Gasoline production in the Northeast is expected to decline to 350,000 barrels a day in 2013, from 580,000 barrels a day in 2011, according to government estimates. At the beginning of 2010, the East Coast had 12 refineries. Since then, four have closed for good or have been idled, according to the U.S. Energy Information Administration. ConocoPhillips's Trainer refinery and Sunoco's Marcus Hook refinery, both in Pennsylvania, were idled in December.
Philadelphia-based Sunoco, which refines and sells fuel, said it will shut its plant in that city by July if it doesn't find a buyer. Known in the industry as "Sunoco Philly," the refinery is the oldest and biggest on the East Coast. It first turned crude into fuel in 1870, 38 years before Henry Ford sold his first Model T. (WSJ, 3/16/2012)