For three months now, US gasoline stockpiles have been dropping steadily. Nationwide, gasoline prices jumped 10.2 cents a gallon last week to an average of $2.97 and $3.46 around San Francisco.

Last week, US gasoline stockpiles dropped for the 12th straight week by another 1.1 million barrels as US motorists continued to burn up gasoline at a rate 1.6 percent higher than last year. While refinery utilization at 88.3 percent is still well below what is needed to build up stocks for the summer driving season, refiners did manage to produce another 300,000 barrels of gasoline per day which reduced the pace at which gasoline stockpiles have been dropping; 1 million barrels last week vs. the 4 million barrels per week we saw earlier last month. US imports remained the same last week at 1.2 million barrels per day, also well below the 1.5-1.6 required to build up stockpiles for the summer.

As has been the case for many weeks, gasoline consumption continues to run above last year, a series of refining problems have kept gasoline output well below the utilization needed to build stockpiles, and the US seems to be unable to find enough refined gasoline on the world markets to make up the difference…

The fundamental problem in keeping the refineries working is that they are simply being pushed too hard. Twenty years ago US refineries were run at an average 78 percent of rated capacity and all was well. Now they need to be operated at close to 95 percent of capacity to keep up with increased summer demand. Moreover, there is a growing shortage of the experienced personnel needed to overhaul our refineries and they are becoming more complex as a result of the need to process more of the heavy sour crude oil that is an increasing share of what is available for import…

Earlier this week, Energy Secretary Bodman said he feared surging gasoline prices will reach a record high, but he remains “reasonably confident” the market will respond to the high prices with new supply. The head of ConocoPhillips, however, recently said he is concerned about the refining industry’s ability to meet growing demands for gasoline.

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