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Refinery fire could kick up gas prices by 30 cents a gallon

August 07, 2012

The fire at Chevron Corp.’s Richmond oil refinery is having an immediate impact on spot prices for the state's expensive blend of unfinished gasoline, sending them higher by as much as 30 cents a gallon over what it cost a day earlier, according to fuel price experts. A similar rise in retail prices should follow quickly, the experts said, but for how long was unclear.

About the only good news was the fact that just a few minor injuries were reported, in spite of what appeared to be an intense blaze that was visible for miles. The fire began Monday evening around 6:15 p.m. at the refinery's No. 4 crude unit.

Chevron's 110-year-old Richmond refinery is one of 21 in California, according to the state's Energy Commission, but only 14 of those make CARBOB gasoline, which is the nation's most expensive blend. Among those, the Richmond refinery is one of the most important, ranking third in production with a capacity of just under 243,000 barrels a day.

Bob van der Valk, a fuel price specialist, said the Richmond facility was particularly important for Southern California, even though it is in the Bay Area. Van der Valk said it supplies gasoline to the Los Angeles area as well as to customers in the Pacific Northwest.

"From the look of things, it's going to be out of service for some time," said Van der Valk, who worked as a pricing manager for Unocal before it merged with Chevron in 2005.

Tom Kloza, chief oil analyst for the Oil Price Information Service, said that the fire could not have happened at a worse time for the state's motorists, with weeks still remaining in the busy summer driving season.

"For California, it's a big refinery and very important to the market," Kloza said.

Currently, the average price for a gallon of regular gasoline in California is $3.859, up 0.6 cents overnight and up by 5.7 cents since last week, according to the AAA Fuel Gauge Report. But the refinery fire's impact won't be felt until current service stations supplies run out and new gasoline is purchased.

In the Midwest, a combination of refinery outages and pipeline ruptures sent prices up by 25 censt to 30 cents a gallon in just the past week.

Gasoline supplies were already less than ideal for California. The most recent statistics from the Energy Commission showed that California has about 4.8 million barrels of gasoline or about 14.7% less than a year earlier. Diesel supplies in California were 13.7% lower than they were last year.

Rob Schlichting, a spokesperson for the Energy Commission, said that the state was not in any immediate danger of low supplies. "This is not considered a tight supply market," he said.

As of Tuesday morning, parts of the refinery were still burning and Chevron was in only the preliminary stages of assessing the damage. A statement on the company's website said that the main fire had been extinguished and that fire officials were allowing "a small controlled burn as a safety measure to reduce pressure. This is helping to ensure more hydrocarbons don't escape. "

Experts said only time would determine how high fuel prices would go, but the impact would be severe if the Richmond refinery remained out of service for a long time. California can't just go to any neighboring state for its gasoline since only a few refineries are capable of making the expensive California blend.

"Who does make it? The state may have to import it from places as far away as Singapore, South Korea and Australia," said Van der Valk, "which means that prices could go sharply higher in the coming days."


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