Refinery Outages Generally Have Small Effects on Gasoline Prices, Gao Says

Michael Giberson

A study by the Government Accountability Office has concluded that gasoline refinery outages tend to have small effects on prices.  While large scale weather events like Hurricane Katrina and Rita did result in large prices increases, such events are rare, the study said. In other findings:

  • Typical unplanned refinery outages tended to increase the cost of branded gasoline by 0.2 cents and the cost of unbranded gasoline by 0.5 cents. (During unplanned outages, branded stations, which are more likely to have long term supply contracts, are served first, while unbranded stations, more likely to not have long term supply contracts with a distributor, find themselves having to scramble a bit more for supplies.)
  • Typical planned refinery outages tended to have no effect on prices at all, likely because planned outages are reasonably scheduled during low demand periods, and the refiner can build inventory in advance of the outage to help maintain supply.
  • Price increases were larger for some special blends of gasoline targeted to smaller markets, since there will be fewer alternative sources of supply in the case of an outage.  As before, prices were much higher for unbranded gasoline than for branded gasoline in areas requiring special gasoline blends (for example, in Tucson, AZ, unbranded stations showed price increased of 4.1 cents per gallon, while branded station prices were up 1.3 cents per gallon due to a refinery outage).

The GAO study examined weekly data on wholesale prices for 75 cities, January 2002 through September 2008. During the period there were about 1,000 planned outages and 1,100 unplanned outages.

The GAO also concluded that there were gaps in federal data collection efforts which have limited the Department of Transportation and GAO efforts to analyze petroleum markets and related issues.

(The link above is to the 48-page pdf version of the report. Sometime soon the GAO will post a summary of the report on this webpage.)