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What’s causing the gas price hike? Purdue economist offers explanation

Purdue University economist reviews the factors behind recent high gas prices.

Posted on June 6, 2013 at 1:00 a.m. | Updated on June 6, 2013 at 7:10 p.m.

The price of gas soared this week in the Midwest, reaching $4.29 in some areas.

Purdue University economist Wally Tyner said Thursday, June 6, that four area refineries — all suppliers to local gas stations — are either shut down or putting out less product than usual.

“We are blessed with the perfect storm of refinery outages at most of the major suppliers in this region,” said Tyner.

A refinery in Detroit is still recovering from a recent explosion. Two others in Illinois are struggling with unexpected maintenance issues. The biggest refinery in the region, in Whiting, is operating at a third of its usual production according to Tyner.

“The outage at the Whiting refinery was planned but it lasted longer than anticipated,” said Tyner.

He added that Whiting is upgrading the refinery to handle a new process. The work started last year and was supposed to be done before summer, when summer travel causes a greater demand for gasoline.

“The most common question people have been asking this week is ‘Why us?’” said Tyner. “And it’s because we have our own refineries, so we are more vulnerable. At times when those refineries are working, it’s great, but when they are down we have to import gas.”

Tyner said in his 35 years of studying economics he’s never seen such a large gap between national average gas prices and Indiana gas prices.

“Right now, the Midwest average is 50 cents higher than the national average,” said Tyner. “I’ve never seen that kind of discrepancy. California almost always has the highest gas prices. Well, not today.”

Tyner said the price of gas is likely to go down by sometime next week.

“We should be near the top of the prices right now, on principal,” said Tyner, adding, “These outages are something you can’t predict.”

In the meantime, Tyner recommends using websites like GasBuddy.com to find the cheapest gas. There are also many apps available for those hunting for the best price on their smartphone.

“If you don’t have to fill up now, don’t,” said Tyner. “If you need gas, put in a quarter of a tank or a half tank. Prices are likely to be lower next week, but that’s not guaranteed.”

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