Refinery Fire, Price Freeze Put Pressure on Arco’s Supplies

About 270 Atlantic Richfield Co. stations have run out of regular unleaded gasoline at some point during the past seven days as Arco struggles to cope with big increases in demand for its lower-priced fuel and the impact of a fire Monday at its Carson refinery.

Much of the surge in demand stems from Arco’s decision to freeze gasoline prices. The company voluntarily froze the prices it charges dealers after President Bush asked U.S. oil companies to show restraint in pricing. Bush’s appeal came in the wake of Iraq’s Aug. 2 invasion of oil-rich Kuwait.

Arco announced a one-week freeze Aug. 8 and Wednesday extended the moratorium indefinitely, saying it would evaluate its supplies and prices daily. Arco, which sells gasoline at about 1,700 stations in five Western states, said its sales volume has increased 9% since it announced the freeze.

“The sales volume is increasing rapidly,” said Douglas Elmets, an Arco spokesman. “We are concerned and we are monitoring the situation on a daily basis.”

He added, “Arco feels it must hold the line as long as possible in compliance with President Bush’s request.”

The biggest increases in demand have occurred in the Southwest, which is also the region experiencing most of Arco’s gasoline shortages, Elmets said. About 80% to 90% of the 270 gas stations that have temporarily posted “sold out” signs are in Southern California, metropolitan Phoenix and the Las Vegas area, Arco said.

Elmets said it has taken an average of about 2 1/2 hours to replenish supplies of regular unleaded at the stations. Demand in Southern California has been particularly strong, he said, rising 10% last Saturday and Sunday and climbing another 12% during the week.

While demand is rising, Arco’s gasoline production initially dropped 30,000 barrels a day as a result of the Carson refinery fire, an industry source said.

The refinery normally produces about 235,000 barrels a day, but the fire cut that to about 205,000 a day Monday, Tuesday and Wednesday. Arco’s other refinery, in Bellingham, Wash., yields about 175,000 barrels a day. The Carson refinery raised production to 220,000 barrels Thursday and expects to reach full production Monday.