LOS ANGELES, Aug. 20 (UPI) -- Consumers will likely face higher energy prices in the coming days as petroleum supplies tighten and hot weather pressures the natural gas market.
The squeeze will likely be felt most acutely in Arizona and Southern California where a typical August hot spell is boosting the use of air conditioners, and a crippled gasoline pipeline near Phoenix is not expected to be back in service until the weekend.
"Gasoline prices have risen 14 cents on average nationally since June 30," the U.S. Energy Information Administration said Wednesday. "Prices rose throughout the nation last week, with the West Coast seeing an enormous increase of 17.3 cents per gallon to reach $1.887 per gallon."
A pipeline operated by Kinder Morgan broke down on July 30, effectively cutting the Phoenix area off from one-third of its gasoline supply. Repairs were made, although a segment between Tucson and Phoenix failed early Wednesday as engineers ran water through the 8-inch line to test the patch.
"The company is repairing the pipeline so that it can restart the test on this segment of the pipe," Kinder Morgan Energy Partners said in a statement. "At this time, KMP believes the Tucson to Phoenix pipeline will be delivering volumes by this weekend."
The weekend seemed to be a long way away on Wednesday as many Phoenix residents spent another day waiting in sweltering heat for a chance to fill up their tanks with fuel that has jumped to a statewide average of $1.855 per gallon, according to the Automobile Association of America, up more than 4 cents from Tuesday and well over last month's average price of $1.594.
Pump prices were pushing $2 per gallon in California due to refinery problems in the Bay Area and the Arizona situation, which is siphoning off fuel from Southern California.
Arizona gets most of its gasoline from Los Angeles, and fierce competition has increased on the spot market as KMP ships more fuel into Los Angeles to make up for the supplies that normally come in from the Gulf Coast over the pipeline that is now shut down between Tucson and Phoenix.
Because the spot market caters to the highest bidder, the price buyers must pay during an unexpected supply disruption can climb steeply and quickly.
Nationally, the price of gasoline was on the rise across the supply chain due to continuing high crude prices and a sizable 1.2-million barrel decrease in the nation's gasoline supply. The American Petroleum Institute's inventory report Wednesday pegged the supply decrease at some 2 million barrels. Some of the decrease could be attributed to the power outages in the East and Midwest, however the EIA found decreases in virtually every part of the country.
"With the Labor Day weekend less than two weeks away, gasoline prices are likely to rise even further on a national basis," the EIA predicted. "Prices should ease in September, as high prices will generate additional supplies just as demand falls off following the end of the summer season."
While there is still one more major summer driving holiday on the calendar, there is plenty of hot weather in store for much of the United States, which will likely keep natural gas prices firm, at least until the weather breaks.
"Natural gas spot prices climbed 25 to 55 cents across the Lower 48 states this week," the EIA noted. "Increases were highest in sun-drenched California, but also significant in the Northeast and Midwest as this summer's hottest weather to date occurred in parts of the two regions."
Slower rates of gas being injected into underground storage for the winter appeared to spook traders who began bidding up both the spot market and the New York Mercantile Exchange where both September and October contracts settled a hefty 15 cents higher at $5.119 and $5.115 per million BTUs respectively.
Also on NYMEX, September crude gained 25 cents to settle at $30.85 per barrel while October finished 34 cents higher at $31.04. September gasoline climbed 1.59 cents to a 5-month high of $1.0036 per gallon.
