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Pump Prices Soar as Supply Cracks Outweigh Weak Demand

Gas station price sign showing record high gasoline prices for over seven dollars a gallon of regular gas.

The United States is running low on fuel on the West Coast and in the Midwest, where street prices are surging despite falling futures markets. Wholesale fuel prices in Los Angeles, San Francisco, and Portland all hit new highs this week, as a series of unplanned refinery shutdowns compounded scheduled maintenance at a time when seasonal stockpiles were already at their lowest level in 14 years.

A similar dynamic is at work in the Midwest, where a deadly refinery fire sent Chicago wholesale gasoline to its all-time high relative to futures. Meanwhile, according to the auto club AAA, gas prices are rising again in many states, as is the national average. Soaring fuel prices on the ground contrast sharply with what’s happening in the oil and gasoline futures markets, where traders are focused on a worsening global economic outlook. The signs of a slowing economy are hard to ignore, from weak fuel demand to collapsing freight markets, not to mention the spate of additional interest rate hikes this week aimed at containing inflation, which will no doubt also stifle growth.

Prices are likely to remain high in the absence of easy resupply options. California is geographically isolated from the country’s supply hubs and receives imports from Asia and Europe that can take weeks to arrive. The Nord Harmony is scheduled to offload fuel in Los Angeles in the coming days, but a lack of new loadings means imports will remain scarce, according to vessel tracking data.