Crippled Exxon Refinery Could Strain Supplies : Energy: Gasoline inventories could shrink more. The firm’s Louisiana operations won’t return to full production until mid-February.
Gasoline inventories, which fell to a 12-year low last week after a rash of refinery shutdowns and extreme cold weather, could tighten further as Exxon Corp. said Friday that its fire-damaged Baton Rouge, La., refinery will not return to full production until mid-February.
Because gasoline inventories normally build during the low-demand winter months in anticipation of the spring driving season, low stocks now could mean short supplies--and higher prices--for drivers mainly in the East and Southeast when spring finally arrives, some analysts said. California, with its own refining system, would be less affected.
The Baton Rouge refinery--the nation’s second-largest--resumed 50% operation Jan. 7, two weeks after a devastating explosion and fire destroyed a football-field-sized storage area on Christmas Eve, killing one worker, Exxon said.
But even though production units suffered minimal damage, the 455,000-barrel-a-day plant will remain at half production while workers replace a series of 90 severely damaged pipelines, said Walter Eldredge, senior engineering associate for Exxon’s domestic oil and gas subsidiary.
Officials of Exxon and the U.S. Occupational Safety and Health Administration must also complete their investigation of the accident’s cause, which is still not known, Eldredge said.
Normally, about 42% of the refinery’s production is gasoline. Continuing low production from the plant could further diminish the nation’s already-low inventories of gasoline, said William Randol, a senior analyst with the First Boston Corp. investment firm in New York. “That will tighten up the gasoline market even further,” he said.
Total inventories of motor gasoline fell by 6.5 million barrels to 210.5 million barrels in the week ended Jan. 5, the American Petroleum Institute, the industry’s main trade group, reported this week. That is more than 18 million barrels below last year’s levels at the same time.
And the Energy Department said gasoline stocks are at their lowest for this time of year since 1977.
Inventories of gasoline have been falling since late December, when refiners switched from making gasoline to producing heating oil to meet high demand in the Northeast resulting from December’s cold snap.
Supplies were further pinched when a number of Gulf Coast refineries suffered shutdowns as unexpectedly cold weather froze equipment. They are only now resuming production, and analysts are not sure whether there is enough time to replenish stocks before spring.
The Energy Department reported that average refinery production of finished motor gasoline--a classification that excludes blending agents--fell to 6.6 million barrels a day in the four weeks ending Jan. 5 from 6.9 million barrels in the period ending Dec. 29. The daily average for most of December was 7.1 million barrels.
Analyst Randol said it could take six to eight weeks to get gasoline stocks back up, presuming that the weather remains normal.
Before the shutdowns, the U.S. refining industry was running as high as 90% of capacity, API reported. In late December, that figure dropped to 79%, but by Jan. 5, it had crept back up to about 81%.
One complicating factor: Many refineries normally take breaks in February for routine maintenance, said Kevin Lindemer, associate director of Cambridge Energy Research Associates in Massachusetts.
“If they take them,” he said, “stocks are likely to stay low, and this could have an impact on gasoline availability when the driving season starts.”
Word of the low supplies drove up futures prices of gasoline in mid-week. On Friday, February contracts for unleaded gasoline closed at 65.09 cents a gallon, down 0.41 cents from the day before. On Thursday, the price had risen 1.17 cents.
Similarly, retail prices climbed nationally an average of 4.54 cents a gallon during the three weeks ending Jan. 5 to $1.1095 for all grades, after falling in the early part of December, according to the Lundberg Survey, the North Hollywood firm that tracks gasoline prices.
On the West Coast, gasoline prices also rose, but less dramatically. There, the price for regular unleaded gasoline at self-service pumps--the most popular grade--increased 1.51 cents per gallon to 94.64 cents in the three weeks ending Jan. 5, Lundberg reported.
Not everyone agreed that low inventories now are precursors of shortages in the spring. “I assume it will take awhile before stocks will be built back up again, but they will, of course, over time,” said John Lichtblau, president of the industry funded Petroleum Industry Research Foundation.
“It’s a long way from the peak gasoline driving season,” added Edward Murphy, a statistician with the American Petroleum Institute “My personal assessment is that it (low inventory now) doesn’t mean a hell of a lot.”
West Coast refiners, including Chevron Corp. and Atlantic Richfield Co., were less affected by the cold weather and said their stocks of gasoline remains within normal limits.
Chevron’s 330,000-barrel-a-day El Segundo refinery cut production after a fire damaged one of its units Dec. 17, but spokesman Michael Libbey said Chevron’s gasoline stocks are “satisfactory.”
FUEL INVENTORIES
Inventories in thousands of barrels Week ended Previous Percent Year Percent Fuel Jan. 5 week change ago change Motor gasoline stocks 210,485 216,932 -2.97 228,820 -8.01 U.S. crude oil stocks 342,222 341,804 +0.12 328,982 +4.02 Distillate fuel stocks 107,766 108,189 -0.39 126,887 -15.07 Includes heating oil, jet and diesel fuel Residual fuel stocks 42,399 44,016 -1.40 43,046 -1.50 Heavy oil burned by industries and utilities
Source: American Petroleum Institute
