Calif. outages should miss refiners- US energy chief

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Thursday May 10, 8:20 pm Eastern Time

Calif outages should miss refiners-US energy chief

(UPDATE: adds comment from Calif. Public Utilities Comm, paragraphs 4, 5, complete Abraham quote, details of Calif. legislation, byline)

By Tom Doggett

WASHINGTON, May 10 (Reuters) - U.S. Energy Secretary Spencer Abraham said on Thursday that California's oil refineries should be exempt from the state's rolling power blackouts, because disrupting petroleum supplies would raise gasoline and other oil product prices.

``It takes only a minimum disruption with respect to any refinery to cause prices to spike,'' Abraham told members of the Senate Energy Committee.

Refineries, along with other businesses and households, can be subject to blackouts when the state's electric grid operator declares an emergency after power supplies become extremely low.

The California Public Utilities Commission (CPUC) may announce a decision by the end of this week on whether oil refineries will be granted exemptions from the rolling blackouts which hit the state again this week, a CPUC spokeswoman said on Thursday.

The California Energy Commission, the state's main energy policy and planning agency, urged the CPUC in a filing last month to spare oil refineries from cuts in their electricity supply, warning that the fuel disruptions that would result could have disastrous effects across the state.

At the Senate hearing, Democrat Dianne Feinstein of California asked Abraham for the Bush administration's support to have refineries continue operating during such blackouts, although the federal government has no responsibility for ordering the blackouts or deciding who would be exempt from them.

If refineries lose power, Feinstein warned that industry speculation about gasoline reaching $3 a gallon in California ``is going to look like a small amount at the end of the summer.''

The senator also said she was worried a temporary loss of power at a refinery would disrupt jet fuel deliveries to the state's several international airports. Refiner Valero Energy Corp. said on Tuesday it is worried that electricity blackouts in California could force it to halt operations at its Benicia refinery, which is no longer protected from power stoppages.

Pipeline company Kinder Morgan was hit with a five-hour power stoppage to its southern California operations on Monday, but fuel deliveries were not affected. Kinder Morgan's lines carry 1 million barrels of refined product daily through California and neighboring states.

Unplanned refinery outages on the U.S. West Coast often lead to sharp increases in wholesale gasoline prices because of the region's isolation from the rest of the nation and the absence of a pipeline connection to the refineries of the U.S. Gulf Coast.

In a related matter, Abraham said he has ordered Energy Department staff to investigate reports that oil companies have told their service station operators in California and the Chicago area to be ready to raise gasoline prices to $3 a gallon this summer.

The department will ``investigate exactly what the source of these speculations and rumors are,'' Abraham told reporters after the Senate hearing. ``I think sometimes these can be self-fulfilling. They can give people an excuse, perhaps, to raise prices, to levels that aren't appropriate based on actual (gasoline) inventories and supply. So, I'm going to try to trace that down,'' he said.

Abraham said the Energy Department was not coordinating its investigation with the Federal Trade Commission, the government agency responsible for probing any potential illegal activity to manipulate gasoline prices and fuel supplies.

-- Swissrose (cellier3@mindspring.com), May 11, 2001


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