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Gas Supplies Drop As Refineries Cut Production

Prices remain at $2 a gallon, demand stays low

By Mark Huffman
ConsumerAffairs.com

April 29, 2009

With retail gasoline prices stuck at around $2 a gallon, U.S. oil refineries are reducing production. As a result, U.S. supplies of gasoline fell in the last week, according to the U.S. Energy Information Administration.

U.S. gasoline inventories fell to 212.6 million barrels last week, a more significant reduction than expected. But it's not that consumers are buying significantly more fuel. The report showed an easing of production at the refinery level had a lot to do with the draw-down.

According to the report, refineries operated at 82.7 percent of their operable capacity last week, down from 83.4 percent the week before. Total gasoline production fell from 9.1 million barrels a day two weeks ago to 8.8 million barrels a day last week.

While demand for gasoline has remained relatively low during the recession, gasoline prices have remained fairly stable over the last several weeks, after steadily rising off their lows at the beginning of 2009. The national average prices of self-serve regular gas is about $2.05.

But consumers may not get hit with higher prices as Memorial Day and the summer driving season approaches. Despite the lower inventories on a week to week basis, supplies of fuel remain high, compared to previous years. James Williams, an economist at WTRG Economics, told Marketwatch.com "from a big picture view, its difficult to see prices going anywhere but lower."

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