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'Summer of troubles' at refineries means record holiday gas prices

August 31, 2012|By Ronald D. White
  • Signage is displayed outside the Chevron Corp. Oronite Oak Point Plant that was forced to close due to Hurricane Isaac in Belle Chasse, La. The U.S. will see record-high Labor Day weekend gasoline problems after a series of summertime refinery and oil pipeline problems.
Signage is displayed outside the Chevron Corp. Oronite Oak Point Plant… (Derick E. Hingle / Bloomberg )

The summer of 2012's widespread refinery and petroleum pipeline problems, as one analyst put it, will mean that many Americans will face record high gasoline prices during the long Labor Day holiday weekend.

In California, analysts have blamed the recent Chevron Corp. refinery fire as the main reason the state will see a second straight year of the highest average prices ever for the traditional three-day ending of the summer driving season.

But the national average for the price of gasoline this weekend will shatter a record set in the summer of 2008, the year that the U.S. saw its highest overall prices ever, even after adjusting for inflation.

Analysts blamed a triple whammy of two Midwest petroleum pipeline shutdowns and two major Midwest refinery outages for the start of the U.S. price spike. And prices had only begun to sink after those incidents before Hurricane Isaac kicked them higher again.

"It's been the summer of troubles for refineries," said Tom Kloza, chief oil analyst for the Oil Price Information Service in New Jersey. Kloza said that the flow of fuel from Gulf of Mexico refineries was interrupted by precautionary shutdowns, even though storm damage was minimal.

"You can shut down a refinery pretty quickly," said Kloza, "But restarting them will take time. These are sophisticated, billion-dollar assets. It's a little more complicated than flipping the on-switch."

In California, the average cost of a gallon of regular gasoline is $4.157, according to the AAA Fuel Gauge Report. That makes it almost certain that the Labor Day weekend will see prices higher than the current holiday record of $3.915 a gallon to $3.973 a gallon, set during the three-day period last year.

That's 29.8 cents a gallon higher than the state's average was on Aug. 7, the day after the Chevron refinery fire in Northern California. The Richmond refinery is the state's third biggest of 14 such facilities. It has been operating at less than full capacity since the accident, which is normally about 243,000 barrels of fuel a day.

Nationally, the average for a gallon of regular gasoline is $3.829, which puts it substantially higher than the current Labor Day weekend record of $3.682 a gallon to $3.686 a gallon set in 2008.

But travelers aren't likely to change their Labor Day plans at this late date, at least in Southern California, according to AAA spokeswoman Elaine Beno. She added that the Automobile Club of Southern California is expecting 2.35 million people in the region to take trips this weekend, up 3.4% from last year.

Beno said 1.85 million of them will be driving, up 3.6% from 2011's numbers.

One of them was Dayna Linares, 25, of Venice, who had used her free smartphone app to find the area's lowest reported price, which was not very low at all: $4.15 a gallon at the Arco at 4th Street and Pico Boulevard in Santa Monica. Linares and two girlfriends were headed for San Diego for the weekend.

"I'm not getting a receipt. I'm not looking. We're going no matter what," said Linares, a part-time student who has two waitressing jobs, as she filled up her light blue 2009 Toyota Rav4. "I really don't want to know how much it is."


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