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Daniel J. Graeber

Daniel J. Graeber

Daniel Graeber is a writer and political analyst based in Michigan. His work on matters related to the geopolitical aspects of the global energy sector,…

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BP to the Rescue for Midwest Drivers

British energy company BP said this week it was nearly finished with upgrades to its Whiting oil refinery in northwest Indiana. Its largest refinery in the United States, the British supermajor said the upgrades have returned the facility to its full design capacity. The company said the facility provides enough fuel to markets in the Midwest to meet the daily gasoline demands of nearly half a million passenger vehicles. That in turn may help with regional supply issues and drive gasoline prices down for Midwest consumers.

BP said the construction of upgrades to the refinery is more than 95 percent complete. The rest of the work should be finished by the end of the year, though a new crude oil processing unit brought on line this week "has returned the refinery to its nameplate processing capability of 413,000 barrels per day."

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The company said the timing of the development comes as North American oil production gains are pushing foreign imports to record lows. BP said the Whiting facility already provides the U.S. Midwest with enough gasoline to keep 430,000 passenger vehicles and 22,000 commercial trucks on the road each day. Whiting can process U.S. and Canadian crude oil.

The upgrade is good news for consumers in the region. The U.S. Energy Department reported last week that planned and unplanned refinery issues in the region meant gasoline inventories were lower than average, meaning pain at the pump for American commuters. Regional consumers were paying record prices for a gallon of regular unleaded gasoline, with drivers in downtown Chicago paying 20 percent more for gasoline last month against the national average.  While some areas are reporting prices are on the rise again, it's likely a response to the upcoming Independence Day holiday in the United States. Oil prices on the international market, meanwhile, are increasing because of the unrest in Egypt, meaning there will be some trickle-down pain for retail gasoline consumers.

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The U.S. Energy Department said refineries in the Midwest don't have the capacity to meet regional demand for gasoline. This is especially the case during the so-called summer driving season, when American families hit the road for vacation. Lower-than-expected production from the Whiting refinery only added to the regional gasoline stress, meaning the U.S. Midwest typically had gasoline prices higher than the rest of the country. According to motor group AAA, however, the region is now in the bottom tier in terms of gasoline prices, where the pain at the pump is about 2 percent less than the national average.

The Energy Department last month said it expected U.S. gasoline prices to average $3.53 per gallon for the season.  OPEC said in June that inventories were adequate though its update next week is likely to be an indicator of things to come. For now, however, U.S. motorists headed out for holiday this week can brief at least a temporary sigh of relief.

By. Daniel J. Graeber of Oilprice.com




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