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September 23, 2022 4:42 PM, EDT

Pump Prices Soar as Supply Cracks Outweigh Weak Demand

gasA driver holds a fuel nozzle at a gas station in Sacramento earlier this year. (David Paul Morris/Bloomberg News)

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The U.S. is running low on gasoline on the West Coast and in the Midwest, where prices are surging on the street, defying falling futures markets.

Wholesale fuel prices in Los Angeles, San Francisco and Portland have all reached record highs this week as a spate of unplanned refinery shutdowns compounded scheduled maintenance, at a time when seasonal stockpiles are already at their lowest level in 14 years.



A similar dynamic is playing out in the Midwest, where a deadly refinery fire sent Chicago wholesale gasoline surging, matching its most expensive level ever relative to futures. Meanwhile, pump prices are rising again in many states, as is the national average, according to auto club AAA.

Soaring fuel prices on the ground are in sharp contrast to what’s playing out in the futures markets for both oil and gasoline, where traders are focused on a worsening global economic outlook. The signs of a slowing economy — from weak fuel demand to collapsing freight markets — are hard to ignore, not to mention the spate of additional interest rate hikes this week designed to rein in inflation that will no doubt also stunt growth. For the consumer already weighed down by historic costs, rising pump prices are another burden they must bear.

Prices are likely to remain high without easy resupply options. California is geographically isolated from supply hubs in the country, and receives imports from places like Asia and Europe that often take weeks to arrive. The Nord Harmony is due to offload fuel in Los Angeles in the next few days, but a dearth of fresh loadings means imports will remain scarce, vessel tracking data show.

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