California May Declare First Gasoline Emergency in 15 Years

[BEER980]

California May Declare First Gasoline Emergency in 15 Years

May 4 (Bloomberg) -- California regulators may declare the first motor-fuels emergency in 15 years amid concern the rupture of a Kinder Morgan Energy Partners LP pipeline may cause shortages of gasoline and diesel, and further price increases.

A 14-inch pipeline that carries fuel from Concord, California, to Reno, Nevada, was shut for six days after spilling as many as 1,000 barrels of diesel into a marsh on April 27. That may have forced refiners to tap fuel reserves to supply filling stations, reducing supplies available for summer, when demand peaks, California Energy Commission spokeswoman Claudia Chandler said.

The commission entered the ``verification phase'' late Friday, which involves contacting all oil refiners, fuel wholesalers, retailers, pipeline operators and military bases in the state to determine whether they have enough gasoline, diesel and jet fuel in storage to avert shortages, Chandler said.

``We're still looking at what the draw was'' on stored fuel supplies after the pipeline spill, Chandler said in an interview. ``We're contacting all the terminals around northern California to see what volume of product they have on hand. It's the first step in the chain'' to declaring an emergency.

Should the agency finds supplies or delivery systems are too constrained to forestall shortages, Governor Arnold Schwarzenegger could declare a pre-emergency, which involves urging consumers and businesses to voluntarily conserve fuel.

The next step after that, if needed, would be an emergency declaration that allows the state to take control of 5 percent of the state's fuel supply for allocation to fire departments, utility crews and trash collectors.

Record Prices

U.S. gasoline and diesel prices have soared to record highs in the past week as refinery shutdowns and tougher anti-pollution rules crimped fuel production by Marathon Oil Corp., BP Plc and others.

Gasoline for June delivery rose 0.45 cents, or 0.4 percent, to $1.2665 a gallon at 9:30 a.m. in New York Mercantile Exchange electronic trading. Yesterday's close at $1.262 was highest settlement price since the contract began trading in 1984. The futures are up 31 percent in the past year.

The energy commission will probably decide ``in a matter of days'' on whether shortages are imminent, Chandler said.

In California, gasoline prices were up 8.9 percent from a year earlier to $2.159 a gallon yesterday, the second highest in the nation, behind Hawaii, according to AAA.

Inventories

Gasoline inventories in the state as of April 23 were down 5.8 percent from a year earlier to 6.289 million barrels, according to state figures. Diesel and jet-fuel reserves were down 29 percent and 14 percent, respectively.

The state's Energy Shortage Contingency Plan defines a shortage as ``an actual or potential loss of supply which significantly impacts the state's energy systems, including rapid increases in energy prices.''

The last so-called verification phase was during the state's 2001 electricity crisis, when rolling blackouts threatened to shut some refineries and pipeline operations.

The state has gone into verification phase ``a handful of times in the past 10 years,'' Chandler said. The last fuel emergency in the state was after the October 1989 earthquake near Santa Cruz that killed 67 and caused $7 billion in damage, Chandler said.

Fuel distributors in neighboring Nevada which rely on California refiners for supplies have also been contacted for details on how they acquired supplies while the pipeline was shut, she said.

Nevada makes less than one-tenth of 1 percent of the gasoline and diesel it consumes, according to the Energy Department. The rest is shipped from other states by pipelines or truck.

Summer Demand

Valero Energy Corp. Chief Executive Bill Greehey last Wednesday said U.S. refiners probably can't build sufficient fuel inventories to prevent shortages during the summer driving season. San Antonio-based Valero is the third-largest U.S. refiner, behind ConocoPhillips and Exxon Mobil Corp.

Nationwide, gasoline inventories of 200 million barrels are 2.7 percent below a year ago, Energy Department figures showed.

Refiners normally add 12.2 million barrels to summer reserves between mid March and June 14, when inventories peak, based on the 10-year average, according to the government. Reserves would need to rise 2.14 million barrels weekly to reach 215 million by mid June.

[stormchazer]

Thank you environmentalist!!

[stormraiser]

LOL good one Jara

[streetsoldier]

Question: Why aren't the major oil/gas producers in this country pumping and refining enough to fill the demand, as in years past?

I could certainly use the royalty checks...

[BEER980]

I think they are running at capacity now. Some of the problem is changing the mix from winter to summer. Look at all the plastic we make and throw away. Plus we have had some "accidents" over the past few months. A couple of plants having fires and just last week that pipeline in CA pumping 1,000,000 gallons of diesel into that marsh. If someone wanted to hurt us real bad all they would need to do is take out a refinery so it would have to be rebuilt.

[j]

Question: Why aren't the major oil/gas producers in this country pumping and refining enough to fill the demand, as in years past?

I could certainly use the royalty checks...

It's worse than that. I do believe, this country hasn't built a new refinery in 6 years. It doesn't matter what OPEC does as far as cutting production. The bottleneck is right here in the USA with the refinerys.

Couple that with some older refinerys on their last leg and we are going to see some major gas hikes in the years to come...regardless of how much oil comes into this country.

But...the good news is...the Spotted Owl population is on the increase.