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US gas prices to keep climbing as refineries dwindle

By Ronald D. White, Los Angeles Times –

LOS ANGELES — Gasoline prices, already at record levels for January, rose again over the last week, the Energy Department said. But that wasn’t necessarily the worst news about the continuing strain on motorists’ wallets: Refinery closures were setting up the eastern half of the nation for more price increases later this year.

Nationally, the average price of a gallon of regular gasoline was $3.439, up a nickel, according to the Energy Department’s weekly survey of service stations, released Monday. The latest average was 33.8 cents above the previous record for the week, set last year, and 77.8 cents higher than the same week in 2010.

Refinery closings were a continuing concern, with the Energy Department noting that the Hovensa refinery in the U.S. Virgin Islands would be shutting down.

The closures of Hovensa and two refineries in the Northeast “would collectively cut as much as 50 percent of current East Coast refining capacity,” the Energy Department said in a report last week.

In addition, a third Northeast refinery may shut down by mid-2012, the agency said.

Phil Weiss, senior analyst for energy for New York-based Argus Research, said the refinery closings were part of an industrywide move to reduce exposure to low-profit refinery operations. But the practical effect was to leave U.S. motorists with little or no supply cushion should any other refineries have to close because of mishaps or disasters.

“A handful of refineries will have the ability to control supply, restrict it and drive prices up,” said Charles Langley, gasoline product manager for the Utility Consumers’ Action Network, a nonprofit watchdog group in San Diego.

Democratic Reps. Henry A. Waxman of California, Edward J. Markey of Massachusetts and Robert A. Brady of Pennsylvania recently released a statement criticizing the refinery decisions, saying consumers “shouldn’t have to face price spikes for home heating oil, gasoline and other fuels created solely by oil companies deciding to shutter refining capacity.”

U.S. benchmark West Texas Intermediate crude fell 78 cents to close at $98.78 a barrel on the New York Mercantile Exchange.

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