Denver running on empty

Low inventory likely to push gas past $3 a gallon

Gargi Chakrabarty, Rocky Mountain News

Friday, April 27, 2007

Denver is seeing a severe crunch in gasoline supply, and pump prices likely will top $3 a gallon in the coming days, industry sources said.

Oil refinery problems in Texas and Oklahoma - which supply Colorado with gasoline through pipelines - are the root cause of the shortage. And the situation is being exacerbated by rising demand ahead of the busy summer driving season.

Pump prices could move toward $4 a gallon this summer if an event such as a severe hurricane or political crisis in an oil-producing nation further squeezes already tight gasoline supplies, analysts said.

"There is no gas in Denver," said Bryant Gimlin, energy risk manager at Fort Lupton-based Gray Oil Co., a wholesale distributor of gasoline and diesel. "The situation here is worse than how it was after Hurricane Katrina."

Several metro-area stations ran out of fuel in recent weeks, covering pump handles with plastic bags and diverting drivers to nearby stations. Others say that while they got timely deliveries, the fuel was priced high.

A Conoco station at 724 S. University Blvd. sold regular, unleaded gas at $2.99 a gallon Thursday.

Colorado's statewide average price was $2.856, and Denver's average was $2.805.

The local wholesale price of gas was $2.43 a gallon Thursday. Add in another 43 cents in state and federal taxes, another 10 cents in transportation charges, and an additional 10 cents to 15 cents in retail margins, and the price is headed beyond $3 a gallon.

"No doubt we will have $3 a gallon," said Roy Turner of the Colorado Wyoming Petroleum Marketers Association, which represents half the states' gasoline dealers.

"We are going into the peak driving season with the lowest inventories we have had," Turner said. "It doesn't look good right now."

When adjusted for inflation, the highest U.S. average retail gasoline price was $3.079 a gallon in March 1981, the Energy Information Administration said. Colorado came close to that mark on Aug. 11, 2006, when the average price hit $3.076.

Thursday, the national average for gasoline stood at $2.877.

AAA Colorado spokesman Eric Escudero warned customers against panic buying of gasoline, saying that could lead to an artificial fuel shortage and worsen the situation. AAA is the nation's largest auto club.

"There may be occasional run- out-of-fuel (situations) in gas stations in Colorado, but there is no reason to panic," Escudero said. "There is plenty of gas available. The worst-case scenario would be to drive to the next block if a station runs out of a particular brand of gas."

Spot outages at some metro Denver and Colorado Springs gas stations began more than a month ago after Valero's Mc- Kee refinery in Texas was shut following a Feb. 16 fire. That refinery, which supplies Colorado via a pipeline, is back online but operating at only partial capacity. Since then more refineries have reported problems.

Mark Copeland, 50, who owns a gas station at 1465 S. Colorado Blvd., said he had problems getting fuel from Valero a while ago but said current supplies are adequate.

Colorado imports 65 percent of its gasoline from neighboring Wyoming, Texas, Oklahoma and the Gulf of Mexico, with the rest coming from the two refineries in Commerce City.

Suncor Energy, which owns both the refineries and is running those at full capacity, is getting gasoline by railcars from other states to keep up with demand, said Steve Douglas, Suncor's general manager of marketing.

The refineries have a combined capacity of more than 90,000 barrels a day, of which 45 percent is gasoline and 30 percent is diesel. The rest is heavier byproduct such as asphalt.

Suncor also owns the 45 Phillips 66 gas stations in Colorado.

"There is no question at all that we are very concerned about supply," Douglas said."

Average prices for unleaded in Colorado

Regular Mid Premium Diesel

Thursday $2.856 $3.055 $3.192 $3.106

Month ago $2.579 $2.759 $2.883 $2.833

Year ago $2.842 $3.040 $3.176 $3.026

• Highest recorded price for regular: $3.076 on Aug. 11, 2006Source: Fuelgaugereport.Com

chakrabartyg@RockyMountainNews.com or 303-954-2976