Gasoline distributors see long-term shortages

At end of September 18% of U.S. refinery capacity remains closed; public starting to react to high gasoline prices by driving less

Steve Quinn

Associated Press Writer

Concern among wholesale gasoline distributors and retailers about long-term supply shortages continued to grow Sept. 30, a week after Hurricane Rita slammed into the Gulf Coast.

And news that BP LLC will indefinitely shut down the nation’s third largest refinery hasn’t given them hope for a quick comeback.

Jay Ricker, president of Ricker Oil Co. in Anderson, Ind., whose product includes BP gasoline, says “supply is getting much, much tighter.”

“Product going through the pipelines used to take 20 days to arrive, but now it’s taking 40 days; that tells me there is not enough product going through the system,” he said.

Hurricanes Katrina and Rita are responsible for about 18 percent of the nation’s refining capacity remaining closed, energy industry officials said.

However, some dealers believe consumers are cutting back on their drive time, which could prevent a price spike similar to what happened in the wake of Katrina.

Cost for a gallon of regular grade was $2.80, according to the U.S. Department of Energy.

“The general public is reacting to high prices, so demand is beginning to drop,” said Jeff Miller, president of Miller Oil Co. in Norfolk, Va. “Usually the market adjusts and the feeling of fuel conservation is starting to show up at the pumps and on television commercials for cars.”

It could be one to two months before some refinery operations return to 100 percent capacity, but some could last throughout the year, said Bob Slaughter, president of the National Petrochemical & Refiners Association.

“You don’t want to over promise and not be able to deliver,” he said. “The industry is working day and night to get these refineries up and running again.”

Prolonged BP shutdown

The company will keep its 460,000 barrel-a-day Texas City refinery closed while it completes maintenance projects, some related to its fatal explosion in March and some connected to Rita.

“All of the projects under way are critical for a safe startup and operational integrity with an emphasis on gasoline production,” said plant spokesman Neil Geary.

In addition to BP’s Texas City facility, 10 major refiners in the direct path of the storms, including four damaged by Katrina, are closed.

Some states are resorting to unique measures to combat a shortage.

In Georgia, consumers enjoyed a month-long gas tax embargo, saving about 15 cents per gallon, said Jim Tudor, president for the Georgia Association of Convenience Stores.

Schools also closed Monday and Tuesday, saving about 250,000 gallons of diesel fuel each day.

Available diesel fuel remains a concern in other regions, including northern Texas and southern Oklahoma.

“We’ve had suppliers increase the price by 20 to 70 cents a gallon,” said Brad Douglas of Douglas Distributing Inc. in Sherman, Texas. “Price is almost secondary right now. If we can get it, we’ll grab it.”