The huge blaze that erupted on Thursday night at one of the largest oil refineries in California is expected to immediately drive gas prices higher throughout the Western United States.
At 9:30pm local time, a jet fuel unit within the expansive two-square-mile Chevron facility located in El Segundo, within Los Angeles, burst into flames, creating a fireball visible from miles away.
Initially, residents feared for their safety as the fire blazed for hours. Now, with several production units halted on Friday, concerns have shifted to the anticipated rise in fuel costs.
Matt McClain of GasBuddy.com, a tech firm that monitors fuel prices across the nation, noted that the fire is likely to cause an increase of ‘five to 15 cents per gallon’ for Californians shortly.
‘The shutdown of this particular refinery affects fuel costs all across the western coast of the United States, extending even to areas like Vancouver, British Columbia, and other parts of Canada,’ McClain informed KABC.
Opened in 1911, the refinery is responsible for producing approximately one-fifth of motor vehicle fuel and 40 percent of the jet fuel 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.
Pictured: Firefighters attempt to put out the fire on Thursday at the Chevron oil refinery in El Segundo, which is just south of LAX
Expert Matt McClain warned that gas prices in California could go up by five to 15 cents in the coming days
‘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.
Pictured: The fire at the Chevron facility continued to burn throughout the night, but was gotten under control relatively quickly, which experts believe staved the worst price increase scenario
Pictured: The Chevron facility is seen on Friday morning with the fire completely extinguished
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.
