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Gasoline prices are rising following refinery fire, oil price increase

Firefighters battle flames at the Phillips 66 refinery in Carson on March 15, 2019. (Credit: KTLA)
Firefighters battle flames at the Phillips 66 refinery in Carson on March 15.
(KTLA)
San Diego Union-Tribune

With drivers already spending a little more for gasoline because of gradual increases in the price of oil, a recent refinery fire in the Los Angeles area will likely lead to even more pain at the pump.

Fuel experts anticipate prices moving up about 10 cents a gallon after Phillips 66 shut down a crude unit at its refinery in Carson because of a fire that broke out March 15.

Oil company managers haven’t said how long the unit will remain offline but Patrick DeHaan, head of petroleum analysis at GasBuddy, a tech company that helps motorists find the cheapest places to buy gasoline, said the fire is not nearly as devastating as the 2015 explosion in Torrance or the 2012 refinery fire in Richmond that resulted in extended periods of supply constraints.

“This is on the lower side of impact, but an impact nonetheless will be coming in a matter of the upcoming days,” DeHaan said.

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David Hackett, president of Stillwater Associates, a transportation energy consulting company in Irvine, said gasoline prices on the spot market in Los Angeles have gone up 10 cents since the days before the fire at the Carson facility about 15 miles southeast of Los Angeles International Airport.

“The spot market is the point at which gasoline first trades,” Hackett said. “And if there is an unplanned outage — and this was clearly unplanned — then people get nervous and make sure they’ve got coverage for their contracts and go into the spot market to start buying. And when they start buying, of course the prices go up.”

How long it will take for the expected price bump to dissipate will depend on how quickly the damaged area of the refinery gets back up and running, Hackett said.

“Generally, prices go up faster than they come down,” Hackett said. “That’s because retailers want to make sure they’re not losing money while the prices go up quickly. And then when the spot market comes down, [retailers are] oftentimes reluctant to go down.”

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Even before the fire, gasoline prices have been creeping up — not just in California but across the country — as oil prices have risen in recent weeks.

Last Christmas, the price of West Texas Intermediate — the benchmark price of domestic crude — was $42.53. The trading day closed Thursday with WTI at $59.98.

Promises of cooperation between Russia and the Organization of Petroleum Exporting Countries, or OPEC, to try to reduce production have also put upward pressure on crude prices. So have collapsing production numbers in Venezuela, where the state-run oil company has cratered.

According to the U.S. Energy Information Administration, the average price of regular gasoline in the U.S. went up 8 cents a gallon to $2.548 last week, which was 5 cents lower than a year earlier.

In California, the average price went up 4 cents a gallon to $3.264. A year earlier, the California average was 16 cents a gallon higher.

In four months, a second iteration of the state gas tax — passed in 2017 by the Legislature and signed into law by then-Gov. Jerry Brown — will go into effect.

The first phase sent gas prices up 12 cents a gallon in November 2017. In July, the second half of the tax will kick in — adding 5.6 cents per gallon to the tab for motorists.

Rob Nikolewski writes for the San Diego Union-Tribune.

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rob.nikolewski@sduniontribune.com


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