The expected run-up in gasoline prices after a major fire at a Bay
Area refinery may not come as quickly as expected, but it's coming.
What isn't known at this point, analysts said, is
how bad it will get.
The market is waiting for Chevron Corp. to report
on the severity of the damage to its 2,900-acre refinery in Richmond, Calif.,
which opened in 1902.
Chevron said Wednesday that the refinery, which
was shut down because of the fire at one of its units, was now partially
operating. A spokesman for the company did not say how much it was producing.
At maximum capacity, the refinery produced was
much as 243,000 barrels a day.
Wholesale gas prices shot up 30 cents a gallon
Tuesday, one day after the fire. Analysts at first said prices at the pump
could go up as much as 35 cents a gallon within days.
But a bit of calm came over the market Wednesday
and wholesale prices retreated by a little more than 6 cents.
There were indications that the situation in the
refinery was still unstable. On Wednesday there was a second, small fire at the
facility. Chevron issued a brief statement, saying the fire "resulted in
no injuries, presented no immediate threat to the public and was extinguished
in minutes."
It wasn't even clear when Chevron would be allowed
to inspect the tower where the fire began. The state's Division of Occupational
Safety and Health said the company must first file a structural engineering
report showing how it will enter the area safely.
Agency spokesman Peter Melton said, "They
don't want anyone going into the area until they are sure it is safe and that
no one is put at risk."
Despite the uncertainty, Tom Kloza, chief oil
analyst for the Oil Price Information Service, said by Monday "you should
see California gasoline prices at or near $4 a gallon again."
Motorists said a surge in pump prices would be
unbearable.
"Even with two jobs I'm not making enough
money," said Claudia Menendez, 30, a single mother who lives in Los
Angeles who was at a Mobil station near USC. "To be honest it's gotten to
the point where I think I have to get rid of my car."
The price of gasoline was already on the rise even
before the effect of the fire could be felt on the consumer level.
The average price of a gallon of regular gasoline
in California had climbed 6.2 cents over the last week to $3.875, according to
the AAA Fuel Gauge Report. Analysts attributed this to oil prices having risen
$15.66 a barrel since hitting a low for the year of $77.69 a barrel in late
June.
Price spikes in oil and gasoline are not unusual
because of major changes in the industry over the last few decades.
Since 1985, the nation's refineries have increased
output 11% through large-scale gains in efficiency and productivity, said
Rayola Dougher, a senior economic advisor with the American Petroleum
Institute. But during that same period the number of refineries in the U.S.
fell more than 35% to 144.
The U.S. has not opened a major new refinery since
1976.
"When you concentrate fuel production down to
a much smaller number of players, prices are much more likely to spike when one
of those refineries goes down," said Joe Hahn, an associate professor at
Pepperdine University Graziadio School of Business and Management. "Every
refinery is more important, and supplies and prices are affected very
quickly."
Hahn cited several examples. In 2005, after
hurricanes Rita and Katrina struck Gulf Coast refineries and other facilities,
the U.S. average for gasoline climbed above $3 a gallon for the first time. The
spike lasted a week.
In 2008, after two more hurricanes closed Gulf
Coast refineries, gasoline prices rose as high as $5.21 a gallon in the
Southeast. Prices returned to normal within two weeks.
Earlier this year, gasoline prices in the Pacific
Northwest rose as much as 70 cents a gallon during the three-month period when
BP's Cherry Point refinery in northwest Washington state was shut down after a
fire.
Over the last week, Midwest gasoline prices
climbed 25 to 30 cents a gallon after two oil pipeline ruptures and refinery
outages in Illinois and Indiana.
"There are too few refineries concentrated in
the hands of too few owners," said Charles Langley, gasoline project
manager for the Utility Consumers Action Network in San Diego.
California has 14 refineries, but Chevron's
Richmond facility supplied as much as 15% of the state's gasoline, he said.
"Fuel prices are volatile in
California," Langley said, "because we don't have a robust,
competitive refinery industry."
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