Higher gas prices expected after refinery fire

[August 10, 2012]  SAN FRANCISCO (AP) -- Analysts expect West Coast gas prices to rise beyond $4 a gallon after a fire knocked out a key section of one of the nation's largest oil refineries.

Meanwhile, the same U.S. Chemical Safety Board team that investigated the oil spill in the Gulf Of Mexico was standing by with state and company inspectors waiting for structural and environmental tests to see if it was safe to enter the unit.

In all, five separate investigations will be done to determine the cause and effects of the Monday night blaze at Chevron's Richmond refinery.

"This is an important accident in its own right, it was a large fire and has the potential to affect fuel supplies and prices," said Dr. Daniel Horowitz, a member of the chemical board.

The average price of regular gasoline jumped in California from $3.86 a gallon on Tuesday to $3.94 on Thursday, according to the website GasBuddy.com.

Some experts expect the disruption in production to last for weeks and push prices beyond $4 a gallon.

"It'll depend on Chevron getting their facility repaired," said Patrick DeHaan of GasBuddy.com.

The Richmond refinery produces 16 percent of the region's daily gasoline supply. The fire knocked out a unit that makes a specialized blend of cleaner burning gasoline that satisfies air quality laws in California, Oregon and Washington.

Sean Comey, a spokesman for Chevron, said myriad factors were pushing gas prices higher, not just the loss of one unit at the refinery.

"There are a variety of economic conditions like rising crude and ethanol costs, which also affect what consumers pay at the pump," he said.

Comey said the refinery continues to produce gasoline, diesel and jet fuel but in reduced amounts.

Experts said inventories of the cleaner burning gas already were low. With the refinery's output in question for what could be weeks, analysts say prices could reach $4 a gallon as soon as Friday.

"California has the cleanest-burning gas in the nation, so this is definitely a market disruption," said Rayola Dougher, a senior economic adviser with the American Petroleum Institute.

California can't easily replace those supplies with imports from Washington state, Asia and the Gulf Coast, so it's more difficult to ease the impact of the lost production, Dougher said.

Some analysts believe other refineries in California could make up for the shortfall, if Chevron's capacity remains limited by the fire.

Tradition Energy analyst Addison Armstrong said California refineries have been producing about 6 million barrels a week, down from 7 million a week last month.

"That should be enough capacity to make up for the loss of output from Richmond," he said.

Comey said Chevron could not estimate when the damaged unit would be back in production. The company also said it did not know when investigators would have access to the site.

Horowitz said investigators will also be evaluating Chevron's emergency response system and other concerns raised by the community.

Hundreds of people contacted attorneys and were expected to file claims against Chevron for breathing problems and other health issues stemming from the thick black smoke that spewed from the facility during the fire.

The company has set up a compensation fund and distributed phone numbers that can be used to file claims. The initial phone lines were overwhelmed by callers, and the company said it was arranging help to meet the demand.

[Associated Press; By JASON DEAREN]

AP business writer Sandy Shore contributed to this report from Denver.

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