Gasoline prices jump 5 cents in one day after Richmond refinery fire

By George Avalos Contra Costa Times RICHMOND -- Gasoline prices jumped in the Bay Area by at least 5 cents a gallon Wednesday after a disastrous fire at Chevron's Richmond refinery that shut down a crucial distilling unit, guaranteeing higher gas prices for Northern California for months to come. "This unit is the heart of the refinery," said Bob van der Valk, a Montana-based fuel price analyst. "Without this crude distillation unit in operation, Chevron can't refine products." He and other analysts said the damage to the refinery, which produces 20 to 25 percent of the gasoline for Northern California, could push gas prices higher for the rest of 2012 and perhaps into 2013. "The East Bay, San Jose area, San Francisco and all the other parts of the Bay Area will be hit by $4-a-gallon gasoline in the next 24 to 48 hours," said Patrick DeHaan, a senior petroleum analyst with GasBuddy. "Supply is very tight on the West Coast." Analysts noted that a similar fire that engulfed a key unit at a refinery in Washington state shut down production there for a four-month stretch from February to June. "Chevron is still putting out hot spots in the area of the original fire," van der Valk said. "They won't be able to do anything there for months." The crude distillation unit that the fire knocked out at the Richmond refinery provides the first step in transforming crude oil into motor fuels and other transportation fuels and products, according to Justin Higgs, a Chevron spokesman. The damaged unit, the only one of its kind at the refinery, supplies most of the feedstock that other production units require later in the refining process. Chevron on Wednesday was shuttling materials that had already been distilled to the other production units at the refinery, and also continued to refine feedstock it had previously bought. "We continue to operate, we continue to supply product," Higgs said. But Higgs declined to provide specifics on current production levels, or to say how long it would take to repair the damage from the fire. Average gasoline prices jumped 6 cents in the East Bay and the South Bay, and 5 cents in San Francisco by evening Wednesday over what they had been late Tuesday, according to a survey by the GasBuddy online site. "Five or 6 cents a gallon, you might see that sort of increase in a week, but to have that in one day, that shows how significant the refinery fire is," DeHaan said. "Five or 6 cents in a day, that's a lot." The average price of gasoline was $3.93 a gallon in the South Bay, $3.91 in the East Bay and $3.99 in San Francisco on Wednesday, GasBuddy reported. "There is definitely a price spike going on," said Gregg Laskoski, a senior petroleum analyst with GasBuddy. "There is no question the fire at the Richmond refinery is the catalyst for this." Chevron's Richmond refinery can handle 244,000 barrels of oil a day. In addition to producing 20 to 25 percent of the gasoline used in Northern California, it also supplies about 50 percent of the jet fuel used at the major airports in the region. "They are probably running at half capacity at the Richmond refinery," van der Valk said. "They can bring in blended stocks from other parts of the world, such as from the huge Chevron refinery in India. That could take two months to get here. Chevron will just try to hobble along for a while at the refinery." Other challenges have surfaced that have contributed to the gasoline price problems on the West Coast. For one thing, refinery inventories are low because refinery operators don't want to be caught with a oversupply of summer fuel ahead of the annual switch to winter fuel blends Oct. 1. And the Valero refinery in Benicia has suffered some hiccups lately. "There are big problems in California right now," Laskoski said. Commentary: It's often not too surprising how gas prices suddenly spike upward whenever a refinery has a malfunction that occurs. It's even more interesting that Chevron hasn't become better prepared for these type of situations through the years.