Tags: Gasoline | Prices | Refinery | Fire

Calif. Gasoline Prices Spike After Chevron Refinery Fire

Tuesday, 07 August 2012 02:20 PM

An hours-long fire that hit the core of Chevron Corp's Richmond refinery, the second-largest in California, was extinguished early on Tuesday as fears of a months-long closure caused a 25-cent spike in regional gasoline prices.

A fire in the crude unit that spewed flames and a column of smoke high above the populous industrial suburb of east San Francisco Bay shortly after 6 p.m. local time on Monday was contained by 11 p.m. and then extinguished, Chevron said. Officials have allowed a small controlled burn to continue.

As traders recalled a similar fire on the same unit in 2007 that left the plant mostly idle for months, Los Angeles benchmark gasoline premiums spiked nearly 25 cents, driving up the price of the nation's costliest motor fuel and delivering a margin boost for competing refiners who may try to increase output. Wholesale gasoline was trading at about $3.25 a gallon.

Not all of the 245,000 barrel-per-day (bpd) plant, which accounts for one-eighth of California's refining capacity, appears to have been shut down, despite local media reports suggesting the sprawling facility had been idled.

"We are still continuing to operate," said spokesman Brent Tippen, adding that he could not yet provide details on which specific parts were running.

With the crude distillation unit (CDU) that apparently triggered the blaze believed to have shut earlier, it is unclear how long secondary units — which rely on feed from the CDU to produce finished fuel like gasoline — can keep running.

Trade sources who saw images of the 40-foot flames that burned for hours feared the closure could last up to three months, although other experts said it was too early to say.

"It's hard to judge the damage. There is a lot of volatile material there and so looks can be deceptive," said John Auers, a refinery specialist with Houston-based consultants Turner Mason. "If there is no major damage to the units, it could be a matter of days before it returns."


Richmond mayor Gayle McLaughlin said she would seek a full investigation by Chevron and independent sources.

Meanwhile, the Richmond Museum of History's event to mark 110 years of the refinery, which had been scheduled for 2 p.m. on Tuesday, has been postponed for now, Tippen said.

An order for more than 100,000 nearby residents to remain indoors had been lifted, and local transit stations had reopened, authorities said.

At Doctors Medical Center in nearby San Pablo, about 200 people sought help, complaining of respiratory problems. The Kaiser Permanente Richmond Medical Center said it saw about 150 people with similar concerns but had no hospital admissions.

In Richmond, where residents have long lived in the shadow of one of the oldest refineries in the United States, some wondered if it would sharpen debate between residents, who worry about the environmental impact of the plant, and politicians who often seek more tax revenues for the declining industrial city.

"I love living in this city. It's beautiful," said Mohammed Abolghasem, owner of Cafe Altura in nearby Point Richmond. He said when he was growing up in Iran everyone knew not to live near refineries, and he was wondered whether he should move.

"But next to a refinery, what do you expect?"


The fire started in the No. 4 crude unit, the plant's only CDU, at about 6:15 p.m., two hours after a leak was discovered, Chevron said. The workers investigating were evacuated once the leak, which Tippen said was the vapor of a hydrocarbon "similar to diesel," started to grow.

The company said there had been only one injury, which was a burn to the wrist, among the workers.

The extent of damage to the plant was not immediately clear. KGO-TV said in an online report that the plant had shut all production, which is common in cases of major fires.

The impact on markets now depends on the duration of the closure. A Feb. 17 fire at the CDU of BP Plc's 225,000 bpd refinery in Cherry Point, Washington, led to a three-month shutdown and sent the regional price premium to more than $1 a gallon in some places.

Any lengthy disruption in production could affect the supply of fuel on the West Coast, particularly gasoline, due to the difficulty in meeting California's super-clean specifications. The region also has few immediate alternative supply sources.

"Chevron will have a hard time finding replacement barrels in an already short market," said Bob van der Valk, a petroleum industry analyst in Terry, Montana.

"Refineries are already drawing down summer-blend inventory in anticipation of the switch back to winter-blend gasoline."

It can take months to repair a CDU at a large plant, during which operations are typically severely limited.

Local residents had been advised to "shelter in place," an order often given during refinery accidents to shield against possible exposure to toxic chemicals or smoke. Sulfuric acid and nitrogen dioxide were released during the incident, according to a filing with the California Emergency Management Agency.

© 2020 Thomson/Reuters. All rights reserved.

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Tuesday, 07 August 2012 02:20 PM
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