30-06-04
You may not be able to hear it tick, but the clock is running out on
California oil refineries chugging away at full speed.
Oil industry expert Tom Kloza said that "there is a 50/50 chance or better
that the second half of the summer we’ll see a (major refinery breakdown),
which could bring gasoline prices up to recent highs or surpass them by 10 or 15
or 20 cents a gallon."
Kloza’s remarks came when he compared this summer to last year’s, when an
August pipeline disruption sent gasoline prices through the roof during a time
they normally settle.
Gasoline prices are currently on a downward trend that has lasted most of
June. Average prices for regular gas in the Riverside/San Bernardino area stood
at just under $ 2.28, more than 12 cents lower than the regional record set June
1, according to the AAA Daily Fuel Gauge Report. Kloza, director of editorial
content for Oil Price Information Service, said the 2004 gas market is
characterized by a clash of "staggering" rises in demand and lagging
production.
"We have less gasoline inventory today than we did in 1983, when the
population was smaller and there was less demand," he said. "It makes
the market extremely volatile." The volatility is easiest to see on the
wholesale spot market, where prices can swing wildly just on the basis of a
rumour.
Earlier, the Los Angeles spot market rose 30 cents after rumours of problems
in three West Coast refineries. The spot began to slip back down. But Kloza said
the sudden rise was worrisome.
"It’s very troubling, because the nature of the beast in the last few
years is to have refinery events that are much more significant," he said.
Bob van der Valk, bulk fuels manager for Cosby Oil, said that the state
refineries were working at full capacity to keep up with the summer driving
season and upcoming holiday. Kloza said he believed that working the refineries
so hard would probably cause at least one of them to break down.
"You have to look at the refining structure in this country like you look
at race cars at a NASCAR event and anticipate that when you run hard and high
for a long time, there will be breakdowns," he said.
Van der Valk also said he believed there was better than a 50 % chance that
one of the refineries would have major problems in the next two months. This
current gasoline atmosphere is a nightmare for consumers but a time of huge
profits for the oil companies, who are benefiting from the unbalance of supply
and demand, said Kloza.
"I think most refiners who have stepped up to talk about this would
acknowledge that they are in the midst of a renaissance of which they have not
seen before," he said.
There are 13 refineries in California that produce the state’s blend of
reformulated gasoline. Before deregulation of the industry in 1981, there were
41 refineries owned by 30 companies. The cut in refineries has made it very
difficult for oil companies to keep up with demand, but it has helped spur the
companies to huge profits in recent quarters.
Shell Oil has announced that it will close its Bakersfield refinery this year,
leaving California with just 12 refineries. Several analysts believe such a move
would drive prices well past $ 3 per gallon next summer.
Source: The Desert Sun