Power Outage Halts Gasoline Production

It will take several days to restore gasoline production to normal levels at three Southern California refineries that were hit by Monday’s power outage in Los Angeles, a snag that threatens to slow the recent downward trend in fuel prices.

The refineries, all in Wilmington, were in various phases of restarting production Tuesday, company representatives said. Together, the plants owned by Shell Oil Co., ConocoPhillips and Valero Energy Corp. account for about 16% of the state’s oil processing capacity.

If all three of the affected refineries were unable to make fuel for three days, California would lose about 8% of its weekly gasoline production and about 5.6% of its diesel, said Rob Schlichting, a spokesman for the California Energy Commission.

For that reason, when traders learned of the refinery outages Monday, they bid up the wholesale cost of gasoline by about 8 cents a gallon, to about $2.15 on the Los Angeles spot market. But prices retreated to $2.13 a gallon Tuesday, so “it doesn’t look like anyone’s very worried about it,” Schlichting said.

Tuesday’s spot price is almost equivalent to a retail price of $2.78 a gallon; the average retail price in Los Angeles on Tuesday was $2.98, according to AAA.

Still, none of the three refineries was making fuel Tuesday.

The refineries were knocked offline at midday Monday when a mistake by employees at the Los Angeles Department of Water and Power triggered an electricity outage.

Refineries are built to run continuously, and because oil components and chemicals are coursing through the plant at high temperatures and pressures, an abrupt shutdown can be dangerous and can damage equipment. At ConocoPhillips, two employees were treated for minor respiratory problems, but the companies reported no other injuries or significant damage.

“We’ve regained our power, we’re generating steam, and we’re trying to get our units up and running,” said Andy Perez, a ConocoPhillips spokesman.

Shell spokeswoman Cecelia Moreno said the company was still restarting equipment.

“For the short term, we do expect an interruption in supply,” said Moreno, who declined to quantify the supply hit. “We’re hoping to be back to normal production by the weekend.”

Valero said that it hoped to have its Wilmington plant processing oil at half its normal rate as soon as today but that equipment problems would prevent the refinery from running at full production for now.