California Oil Refinery Fire Likely to Increase Gas Prices

The enormous blaze that erupted Thursday night at one of California’s biggest oil refineries is anticipated to cause a swift increase in gas prices throughout the Western US.

A jet fuel section inside the expansive two-square-mile Chevron plant located in El Segundo, a Los Angeles neighborhood, erupted into a massive fireball visible from miles away at around 9:30pm local time.

Initially, residents were fearful for their safety as the fierce flames illuminated the night for hours, but now, with several production units shutting down on Friday, their concerns have shifted to the rising costs they’ll encounter at the gas stations.

Matt McClain from GasBuddy.com, a tech company that tracks gas prices all over the country, said the fire will likely cause Californians to pay ‘a nickel to 15 cents a gallon’ more in the coming days.

‘This particular refinery, anytime it shuts down, it impacts prices all along the western coast of the United States, and even into places like Vancouver, British Columbia, other aspects in Canada,’ McClain told KABC.

The refinery, which opened in 1911, produces about one-fifth of motor vehicle fuel and 40 percent of jet fuel that is consumed in Southern California.

And since the state already has a limited number of operational refineries, many of which are undergoing renovations, any problems with the Chevron facility can wreak havoc on the gasoline market.

McClain said when the damage looked worse, he was hearing estimates of a 30 to 90-cent hike per gallon. But since the fire was brought under control relatively quickly and contained a limited area of the refinery, experts have revised their predictions.

‘As long as the initial reports of the extent of the damage remains, it’s actually a very positive thing for gasoline consumers,’ he said.

Although a gasoline unit was not affected in the fire, the mere appearance of damage often spikes wholesale spot prices, which can trickle down to local gas stations in a matter of days.

Economist Severin Borenstein told the Los Angeles Times that the length of time production units are down will significantly impact price movement.

If it lasts for a few weeks, gasoline could get prohibitively expensive, he said. Imports and gasoline that is being held in storage could alleviate the worst of it, but imports typically take a month to arrive.

The price of a regular gallon of gas in the Los Angeles area is $4.718, up from $4.639 a month ago and $4.543 a year ago.

This comes as two major refineries plan to wind down operations in the near future.

The Phillips 66 twin refinery complex in Los Angeles County is closing this quarter, and Valero’s Bay Area facility is shutting down early next year.

These two operations account for about 20 percent of the state’s oil refining capability, which has led to further concern about prices skyrocketing.

Governor Gavin Newsom has been blamed for this by Republicans, and in recent weeks, he has signed a number of bills that look to address affordability issues.

He approved a bill last month that will allow 2,000 new oil wells per year through 2036 in Kern County. It’s a huge departure from his goal of phasing out oil extraction by 2045. 

He also signed a bill this week that will allow gas stations to sell cheaper gas with 15 percent ethanol. The typical cocktail is 10 percent ethanol and 90 percent gasoline.

Ethanol 15, as it’s called, has not been fully reviewed by California air regulators and some environmental groups say it has the potential to create more smog.