Refinery fire may raise gas prices at pump

www.suntimes.com February 19, 2003 BY ART GOLAB STAFF REPORTER

A fire Tuesday shut down most of the gasoline-producing capacity at the BP oil refinery in Whiting, Ind., prompting an immediate rise in Chicago area wholesale gas prices of 7.5 cents a gallon and making it likely that prices will rise at the pump later this week.

"That's a terrific jump," said Bill Fleischli, vice president of the Illinois Petroleum Marketers Association, which represents independently owned gas stations and convenience store operators.

The wholesale hikes could translate to higher prices at the pump later in the week, when gas stations are resupplied, Fleischli said, though he added that, in competitive markets like this, dealers sometimes will absorb the increases for a while before passing them on.

Already last week, gas prices in the Chicago area hit a record high for February, $1.60 a gallon, on average, for regular unleaded, according to a survey by the AAA-Chicago Motor Club. On Tuesday, the Chicago average was $1.74 a gallon, according to chica gogasprices.com, a Web site that compiles averages based on reports from consumers throughout the area.

"Stockpiles of crude oil are the lowest since 1975," Fleischli said. "So now you've got an interruption of a major refinery in the Midwest, this along with problems in Venezuela, the uncertainty of the political situation in the Middle East and the cold weather on the East Coast. All that has caused supplies to shrink and has sent the markets higher."

Not helping matters is that the fire happened at a critical time, as refineries across the nation are preparing to make the switch to summer-grade fuels, said Dave Sykuta, executive director of the Illinois Petroleum Council, which represents major refiners and oil companies.

Shortages of these fuels, which are refined especially for the Chicago area because of federal air pollution regulations, have pushed prices higher here in past summers. The special formulations have to be in the pipeline May 1, and refineries need 45 to 60 days to make the switch and build up adequate supplies.

The fire at the BP refinery in northwest Indiana knocked out 550,000-gallons-a-day of gasoline-refining capacity at the largest of the three oil refineries in the Chicago area.

It started around noon Tuesday and was extinguished within an hour. A preliminary investigation indicates it started when a leak from an oil line ignited, BP spokesman Tom Keilman said.

Three BP employees received hospital treatment for minor injuries.

Keilman said the blaze affected a part of the refinery that makes gasoline and that other parts of the plant will still be operational. The company might not know until the end of the week how extensive the damage is or how long it will take to repair, he said.

News of the fire sent the wholesale price of gasoline here--the price paid by gas stations buying on the "spot" market--up by 7.5 cents and contributed to smaller increases in New York and the Gulf Coast.