Introduction to the Chevron Fire
The fire at the state’s second-largest oil refinery in El Segundo not only produced a giant fireball, but it’s expected to boost Southern California gas prices almost immediately — but by how much depends on how long the refinery might be out of operation.
The Impact of the Fire on the Refinery
The Thursday evening explosion at the Chevron refinery damaged a jet fuel production unit at the facility, but by sunrise Friday, there appeared to be little damage at the 1,000-acre complex, though some flames were still visible.
Refinery Capacity and Production
The historic refinery, which opened in 1911, produces approximately one-fifth of all motor vehicle fuels and 40% of the jet fuel consumed in Southern California. This region already faces tight supplies due to limited refinery capacity in the state, which imports hundreds of thousands of barrels of gasoline daily.
Economic Implications
Economist Severin Borenstein, faculty director of the Energy Institute at UC Berkeley’s Haas School of Business, said that it’s difficult to determine from early reports how disruptive the fire will be to its gasoline production. However, fires like this typically spike wholesale spot prices, which are reflected at the pumps within a few days. If the refinery is offline for a few weeks, it could substantially raise gasoline prices. Imports and gasoline held in storage could help fill in supplies, but additional imports take up to a month to arrive.
Potential Price Spike
“In the meantime, we could see a significant price spike if in-state inventories are limited,” Borenstein said, noting that the fire comes at a moment when many refineries in the state are scheduling maintenance.
Details of the Fire
David Campbell, field director with USW Local 675, told The Times that the fire broke out in the refinery’s Isomax complex, which converts gas oil into higher-value products such as jet fuel.
Comparison to Previous Incidents
In 2015, an explosion and fire at the Exxon Torrance refinery caused a large and lengthy spike in the price of gasoline because it took most of the year to bring the plant fully back online, he said. But recoveries from other refinery disruptions have been shorter, with a much smaller effect on the market.
Current Gas Prices
The price of a regular gallon of gasoline averages $4.718 in the Los Angeles-Long Beach area, up from $4.639 a month ago and $4.543 a year ago, according to AAA.
Refinery Closures and Political Implications
The fire comes as the Phillips 66 twin refinery complex in Wilmington and Carson is winding down operations this quarter after the company announced its closure last year — and after Valero said in April it would close its Bay Area refinery early next year. The refineries account for an estimated 20% of the state’s oil refining capacity.
Political Response
The closure of the Los Angeles-area refinery became a political football last year with Republicans and gas station operators blaming the policies of California Gov. Gavin Newsom for the state having the nation’s highest gas prices.
Policy Changes
With a landmark state law calling for California to become carbon neutral by 2045, Newsom had directed the state to stop issuing fracking permits and to phase out oil extraction by 2045. He also signed a bill allowing local governments to block construction of oil and gas wells.
Recent Developments
Newsom did an about-face last month, signing a bill that will allow up to 2,000 new oil wells per year through 2036 in Kern County. The bill circumvents a decade of legal challenges by environmental groups seeking to stymie drilling in the county that produces about three-fourths of the state’s crude oil.
Ethanol Policy
And just this week, Newsom signed a bill that will allow gas stations to sell cheaper gas with 15% ethanol, even though state air regulators have not completed their review of the fuel.
####### Potential Savings
The governor’s office touted a study that said the gas could lower prices at the pump by up to $0.20 per gallon and save Californians as much as $2.7 billion annually.
National Gas Prices
Currently, the average price of a gallon of regular gas at the pump nationwide is $3.152.
Conclusion
The Chevron fire is expected to have a significant impact on gas prices in Southern California, with the potential for a substantial price spike if the refinery is offline for an extended period. The fire highlights the challenges faced by the state’s refining industry and the need for a balanced approach to energy policy.
FAQs
- What was the cause of the fire at the Chevron refinery?
- The fire broke out in the refinery’s Isomax complex, which converts gas oil into higher-value products such as jet fuel.
- How will the fire affect gas prices?
- The fire is expected to boost Southern California gas prices almost immediately, with the potential for a significant price spike if the refinery is offline for a few weeks.
- What is the current average price of a gallon of regular gasoline in the Los Angeles-Long Beach area?
- The price averages $4.718, up from $4.639 a month ago and $4.543 a year ago.
- How do the current gas prices in California compare to the national average?
- The national average price of a gallon of regular gas at the pump is $3.152, significantly lower than California’s average.
- What recent policy changes have been made by Governor Newsom regarding oil and gas production?
- Newsom signed a bill allowing up to 2,000 new oil wells per year through 2036 in Kern County and another bill allowing gas stations to sell cheaper gas with 15% ethanol.
