Fuel prices: Working group hears potential solutions during meeting
Cheyenne – Conversations continued during a Gov. Mark Gordon Gas and Diesel Price Working Group meeting July 15 and July 22.
“Fuel prices have hit yet another high this past week, driving inflation affecting our seniors, veterans and all Wyoming citizens,” Gordon said. “Yet, all we hear out of Washington, D.C. is it’s someone else’s fault, and there’s no end in sight. Here in Wyoming, we need to look for any possible way we can provide some relief for our citizens.”
Petroleum Association of Wyoming Executive Director Pete Obermueller commented it’s not as simple as just producing more gasoline.
“Gas prices rise like a rocket, but fall like a feather,” he said, noting fuel price is also beyond the control of up-stream oil and gas producers.
Wyoming Department of Transportation (WYDOT) Director Luke Reiner suggested, “Really what we need fundamentally, both state and nationally, is the ability to refine more.”
Wyoming Representative and Worland native Mike Greear asked, “Is increased pipeline capacity into the state of Wyoming something we should look at?”
Wyoming Department of Revenue Director and working group Chair Brenda Henson suggested there may be both long- and short-term solutions to fuel price concerns, noting the problem must be addressed before it is dire.
Production
In Wyoming, 21 rigs were operating in the state in late July 2022. Monthly production of crude has recovered to about two-thirds of where it was prior to the pandemic but has essentially held flat. Obermueller suspects, despite reporting lags, production has increased slightly.
“The stock in refined products – that is, the supply at the front gate of the refinery – is on the low end of the five-year average. This is how much crude is available for refineries to refine,” Obermueller explained. “As our supply is coming back, but still low, it signals there is a supply crunch, which signals the market prices should be higher.”
“This is a global phenomenon,” he emphasized.
Gasoline stocks are below the five-year average, and diesel is also below the five-year average.
Refining industry
In Wyoming in 1978, 12 operating refineries had a capacity of 188,000 barrels. Today, only three refineries operate with a capacity of 118,000 barrels. Nationwide, refinery numbers have also dropped.
“Companies were not able to maintain maintenance on relic refineries,” Triple C Enterprises Energy Consultant Steve Cure noted. “Major oil companies are also not willing to put investment into relics with the current political climate and green energy push.”
At the same time, demand has increased, with vehicle traffic on Interstate 80 and populations in Colorado both doubling since 1980.
“The entire Rocky Mountain Region is in a supply deficit, and we’re competing for fuel in higher population areas. We need to look at additional supply logistics,” said Cure. “Peripheral markets, including Utah, Nebraska, Colorado and Montana, all compete for the same fuel.”
Seeking solutions
Cheyenne Logistics Hub’s Joe Stephenson said sourcing gas and diesel from other refineries around the country may be a possible solution. Building new pipelines and using existing pipelines are other possibilities for helping alleviate fuel supply issues.
“However, given our current government, the likelihood of those new pipelines being put in, in a timely fashion, is probably not going to happen,” Stephenson explained. “Their appetite for pipelines in general is really not favorable right now.”
He noted it may be possible to transport fuel into Wyoming by rail tank cars, then transloading fuel to trucks for delivery, a process Cheyenne Logistics Hub has used on a very small scale for two years.
“The downside of using rail right now is we don’t have a steady enough supply of fuel, and we’re only bringing in fuel Monday through Friday, 7 a.m.-5 p.m.,” he noted. “We know if we’re going to alleviate supply issues, we would have to operate 24/7 and be able to guarantee enough supply to build truck lanes and loading racks.”
No simple solutions
“Ultimately, all of this discussion should lead us to have a sense of humility about our ability to do anything at a state policy level, in particular, that will immediately, or in the long-term, affect prices at the pump,” Obermueller said. “For better or worse, Wyoming is a part of the global market. We’re a player – a small player in the global market, and when supply shocks happen on the crude side, it ripples down to what we heard before.”
He continued, “We can try to take specific steps, but in terms of correcting the price at the pump, it’s a supply and demand problem now. There has to be a supply and demand solution to that.”
Obermueller noted Gordon has already done much of what the state of Wyoming can do to impact the supply and demand problems.
“Pushing through the headwinds to further recover our ability to provide crude to refineries is paramount,” he continued. “That includes, of course, pushing against a federal government that is openly hostile to the work we do in Wyoming.”
This article continues the discussion detailed in an article from the July 23 edition of the Wyoming Livestock Roundup. Saige Zespy is a correspondent for the Wyoming Livestock Roundup. Send comments on this article to roundup@wylr.net.
