Gas Prices May Go Up Due To Richmond Refinery Fire
RICHMOND (CBS SF) -- A fire that burned out of control for hours Monday night at the Chevron oil refinery in Richmond shut down the facility's crude processing unit, causing concern that gas prices could be driven higher as a result.
The financial news agency Reuters was quick to note that "a lasting outage at the refinery could cause a swift rise in gasoline prices across the West Coast, a region that is isolated from other markets."
Chevron's refinery is particularly big and important to the market, said Tom Kloza, chief oil analyst at Oil Price Information Service.
It produces about 150,000 barrels of gasoline a day -- 16 percent of the West Coast's daily gasoline consumption of 963,000 barrels, according to Kloza.
With inventories of gasoline in the region already low compared with the rest of the country, pump prices in California and elsewhere on the West Coast will soon average more than $4 per gallon, Kloza said.
"It's a very key refinery," he said.
Chevron spokesman Lloyd Avram said he did not have an update on when the refinery could be restarted and declined to comment on what kind of impact the shutdown might have on the gasoline market.
Price Futures Group oil analyst Phil Flynn said pictures of the fire suggested it would not be back on line soon.
Flynn predicted motorists would see higher prices at the pump almost immediately. "I'm hearing five to 10 cents, but I think it's probably going to be double that," he said.
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It's not unusual for an entire refining plant to be shutdown in the wake of a major fire, according to state regulators, who explained that it could take months to make repairs at the crude unit - which significantly hampers the prospect of any operations.
Experts cited a brief fire in February at a smaller refinery in Cherry Point, Wash., which led to a three-month shutdown there that Reuters reported had "a more dramatic effect on U.S. gasoline prices than the threat of war in the Middle East or a historic boom in domestic oil output."
In the case of the Chevron Richmond Refinery, the facility is even more strategically significant than Cherry Point. The Richmond facility is among the country's largest and most important refineries -- processing up to 240,000 barrels of crude oil a day, according to the company's website.
The facility makes high-quality products that include gasoline, jet fuel, diesel fuel and lubricants, as well as chemicals used to manufacture many other useful products. It is the largest producer of base oils on the West Coast, the Associated Press reported.
California is home to the nation's largest refining industry, behind Texas and Louisiana, and Reuters indicated that it has little spare capacity and no readily available alternative supplies.
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