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Colo. gas cheapest in nation

Refiners' support for low wholesale cost helps drivers

Gargi Chakrabarty

Published January 10, 2008 at 12:05 a.m.

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Vapors burn off near a fueling area that stores ethanol, gasoline and diesel fuels at the Suncor refinery in Commerce City. On Wednesday, Colorado's average gasoline price was $2.891 a gallon.

Photo by Matt McClain / The Rocky

Vapors burn off near a fueling area that stores ethanol, gasoline and diesel fuels at the Suncor refinery in Commerce City. On Wednesday, Colorado's average gasoline price was $2.891 a gallon.

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At $2.891 a gallon, Colorado's average gasoline price Wednesday was the cheapest in the nation.

That's terrific news for drivers, for the second week in a row, according to AAA Colorado. But it could last only until the next refinery or pipeline problem crops up, says Parker petroleum consultant Bill Hougland.

Hougland attributes Colorado's cheap pump price to Suncor, owner of Colorado's only refinery in Commerce City, and other bigger suppliers supporting a low wholesale gasoline price.

That, in turn, discourages other suppliers from bringing additional gasoline from Oklahoma or Texas to bolster the market here. So, any supply disruption, caused by an unplanned refinery outage or a pipeline leak, could trigger a fuel shortage in the Denver area.

"The low local wholesale price is preventing other suppliers from bringing in gasoline from other markets to Denver," Hougland said. "If there is a hiccup in the refinery or a pipeline problem, then we could be facing a shortage of gasoline."

Suncor's refinery supplies about a third of Colorado's gasoline and diesel demand. Other gasoline suppliers include Frontier Oil, Shell, ConocoPhillips, Sinclair and Valero.

Don Smith, Suncor's director of sales and marketing, said Colorado's cheaper gasoline price was a result of slumping demand and higher levels of gasoline inventory - a typical cycle this time of the year.

"We price our product competitively in the marketplace," Smith said. "And we do so according to supply and demand dynamics occurring at a particular time."

Smith said currently "there's plenty of gasoline supply in the marketplace." If Denver's low wholesale price was discouraging spot buyers bringing gasoline from Oklahoma and elsewhere, then it was a function of the market. But if there were any risk of a supply disruption, then the market would adjust to that, he added.

"What we are seeing right now is a reflection of lower demand and a long bit of supply within Colorado," Smith said. "If those dynamics were to change, then prices will move accordingly."

Meanwhile, Hougland said some of his supplier clients have stopped bringing gasoline from Oklahoma to Denver.

For example, on Wednesday, Denver's lowest wholesale price was $2.30 a gallon, about 7 cents lower than the $2.37 spot price in Tulsa - implying that a supplier who bought on spot in Tulsa and transported gasoline to Denver (costing 5 cents a gallon) fetched a lower price here than his purchase price.

Metro Denver's gasoline suppliers have shrunk from about 20 in the early 1980s to fewer than a dozen in past years - partly because of energy company mergers and the odd local market with pipelines designed only to bring in gasoline, not to take away excess gasoline.

Bryant Gimlin, energy risk manager at Fort Lupton-based Gray Oil Co., a wholesale distributor of gasoline and diesel, said Colorado has the cheapest wholesale pricebecause of the one-way pipelines.

The downward trend in price, Gimlin said, could be traced to high December prices in Colorado.

Suppliers began shipping more gasoline here to cash in on the price, resulting in a glut and subsequent price decline.

"Once the seasonal demand lowered, there was excess supply and the fuel had to be sold off," Gimlin said. "It is true that wholesale price in Denver now is low, but it will correct itself."

chakrabartyg@RockyMountainNews.com or 303-954-2976

Prices at the pump

A sampling of regular, unleaded gasoline per gallon across the nation:

Colorado: $2.891

Oklahoma: $2.975

Kansas: $3.001

Louisiana: $3.017

Utah: $3.033

Indiana: $3.133

Nebraska: $3.140

Illinois: $3.202

California: $3.349

Hawaii: $3.478

Comments

  • January 10, 2008

    1:43 a.m.

    Suggest removal

    souletrain writes:

    Funny you didn't mention Wyoming in your list of states. Just up the road on I 25 we are paying 2.75 for regular unleaded at Kings Soopers making it cheaper than Colorado.

  • January 10, 2008

    7:54 a.m.

    Suggest removal

    ashlandbus writes:

    Interesting, we are paying $2.72 at Safeway in NW Denver, and that doesn't include the $.10 discount. I bet the $2.89 takes into account places like Vail that are more expensive than the Denver area.

  • January 10, 2008

    12:18 p.m.

    Suggest removal

    CUBUFFINSUNDEVILCOUNTRY writes:

    Well Colorado, Congrats!!! Unfortunately, now that this knowledge has been placed in print, the prices will go up. The Big Oil Honchos, will see that they are pricing the fuel too low, and need to get the profit, and make you pay for it. A few months ago, here in Arizona, we had the least expensive fuel in the metro areas in the nation. Once it was repoted in the AZ Republic, we went from 2.69/gal to 2.99/gal in 1 week. So, enjoy it while you can.