Fuel armadas scurry to rescue supply-starved US Midwest

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Fuel armadas scurry to rescue supply-starved US Midwest Updated: Fri, Aug 24 2:43 PM EDT

By Richard Valdmanis

NEW YORK (Reuters) - An armada of fuel tankers and barges are making their way to the U.S. Midwest from as far away as the North Sea to rescue the fuel-starved region from another supply crunch.

The ships, surging in a wave up the Mississippi, and headed toward the gaping mouth of the St. Lawrence River, are expected to begin feeding the heartland with much-needed gasoline and diesel by as early as next week.

The fresh influx of fuel will be welcome relief for the region, which has been left to handle rock-bottom supplies and sky-high prices following a prolonged shutdown of a key Citgo refinery in Lemont, Illinois, and a number of smaller refinery woes.

"Barge traffic up the Mississippi has increased ten-fold," said Ron Hull of Sea Hull Inc., a shipping brokerage in Texas. "Barges are fully booked till October. The Midwest has really tightened up since Citgo."

The Midwest pulls more barrels off the Mississippi the higher local prices rise, to make up the difference for its limited regional refinery supply and constricted shipments up the major pipeline from the Gulf Coast refining center.

The region's lack of options to feed strong motorist and agricultural demand has made sudden fuel price spikes all too familiar, most notably a dramatic doubling of gasoline prices in Detroit and Chicago last summer.

International brokers have also been fielding calls for larger fuel tankers to be brought in from overseas, following Citgo's announcement Thursday that its 160,000 barrel per day plant would remain down for as long as six months.

"I saw a deal talked for a North Sea tanker and a Caribbean tanker into Chicago this morning," said Ragnar Sissener of Brookwater Ltd. in Connecticut, adding that a North Sea tanker would take roughly nine days to reach Chicago through the St. Lawrence and Great Lakes.

The surge of waterborne products comes after a staggering jump in wholesale prices for gasoline and diesel in trading hubs of the Midwest, as dealers expected Citgo's outage to cut supply just ahead of agricultural buying for the harvest and amid continued strong driving demand at the end of summer.

Wholesale gasoline prices in Chicago have jumped nearly 30 cents to $1.15 a gallon since Citgo's refinery went down Aug. 14, according to dealers. That is matched by a 15 cent spike at the Chicago pumps last week to $1.71 a gallon -- 27 cents higher than the national average of $1.44 a gallon.

"It's absolutely crazy here, if you want the truth," said one gasoline trader.

Meanwhile, wholesale diesel prices have jumped nearly 23 cents in Chicago to roughly $1.04 a gallon amid worries that there will not be adequate supply to bring in the autumn crops.


-- Martin Thompson (mthom1927@aol.com), August 24, 2001


Gas in central Iowa is selling for $1.67 tonight. suzy

-- suzy (itssuzy2@aol.com), August 25, 2001.

Still "Living On The Edge!" One mishap and a regional crisis develops. Is this still the effects of Y2K, or is it the beginning of the "Hubbert Curve" Real McCoy? I note keenly that the ever- increasing "back work ratio" is not cited in these mathematical models. (The "back work ratio" is the energy overhead cost of producing energy.)

-- Robert Riggs (rxr.999@worldnet.att.net), August 25, 2001.

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