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AAA: BP refinery outage means several weeks of expensive gas

Once the issue is resolved, gas prices will drop dramatically in time for Christmas.

By Daniel J. Graeber
AAA: BP refinery outage means several weeks of expensive gas
Gasoline prices in the Great Lakes states surging far above national average after BP reported an outage at its Whiting refinery. Photo by Kevin Dietsch/UPI | License Photo

WASHINGTON, Aug. 14 (UPI) -- It could be the end of September before gas prices in the Great Lakes region move lower, though BP is likely losing big after a major refinery issue, AAA said.

BP reported one of the largest of three crude oil distillation units at its refinery in Whiting, Ind., was shut down Saturday. A spokesperson said the outage has reduced production at the refinery, the sixth largest in the nation and a key gasoline supplier to the regional market.

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Gasoline prices in the region increased dramatically as a result of the outage, skewing the national average price upward. AAA reports a state average retail price for a gallon of regular unleaded gasoline in Indiana at $2.89, up 48 cents from last week. For Illinois, the state average increased from last week 37 cents to $2.97 per gallon. In Michigan, the state average price of $2.99 per gallon is 46 cents higher than last week.

Michigan gas prices alone increased 17 cents from Thursday.

Michael Green, a spokesperson for AAA, said in response to email questions BP is likely losing substantial revenue in its refinery business as Whiting is the largest in its portfolio.

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"BP is losing a significant amount of business at the busiest driving time of the year. Meanwhile, its refining competitors are able to dramatically increase their profits," he said. "The situation would be similar to Apple being unable to sell phones around Christmas and losing out on business to Google and Microsoft as a result."

BP said it has no estimate for a return to normal operations at Whiting. AAA said it expects it will be several weeks before the issue is resolved, which means gas prices in the region could remain near the $3 mark through September. Green said gas prices by the end of September should drop dramatically because, by then, people will be driving less and refiners will have switched to a winter blend of gasoline, which is cheaper to produce.

The national average price for a gallon of gas for Friday is $2.64.

Illinois Attorney General Lisa Madigan and Michigan Attorney General Bill Schuette have been asked to examine why one refinery is pushing retail gasoline prices so high and so quickly.

"I am calling into question the approximately 80 cent increase in a matter of days that Southwest Michigan residents are being forced to pay at the pump," Michigan state Sen. John Proos, a Republican from the southwest city of St. Joseph, said in a statement. "A single glitch at a regional plant is causing a drastic and sudden increase in gas prices when the 2015 average price of a barrel of crude oil is projected at $49."

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Crude oil prices represent about 40 to 50 percent of the price at the pump.

BP completed a $4 billion upgrade at the Whiting refinery in 2013.

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