By Noah Austin, POLITICO
SACRAMENTO, California — The fire Thursday night at California’s second-largest oil refinery spiked wholesale fuel prices and raised the temperature on debates over contentious fossil fuel industry regulations.
What happened: At about 9:30 p.m. Thursday, a blaze broke out at the Chevron El Segundo Refinery south of Los Angeles along the coast. The company released a late morning statement that the fire was out and that no injuries were reported. Chevron did not comment on the cause of the fire, whether gasoline production at the facility had ceased and how long refinery operations may be impacted.
The incident took place at a processing unit located near the southeast corner of the sprawling campus, according to Chevron. An industry analyst, who reviewed a report on the incident and was granted anonymity to discuss it, said the impacted unit was the Isomax 7, which is involved in producing heavier fuel, including jet fuel.
On Friday morning, the price of California wholesale jet fuel increased about 14 percent to $2.47 per gallon. Wholesale gasoline prices increased by about 8 cents, reaching $2.45 per gallon.
Though it appears that the jet fuel market will bear the brunt of the fallout from the fire, analysts did anticipate that the uptick could hit drivers at the gasoline pump.
“I do think that this will cause prices to move higher,” said Alex Hodes, an energy market strategist for StoneX. He pointed to an uptick in bidding in the Singapore gasoline market, which California firms turn to when supplies are tight locally.
“It looks like people are starting to kind of scramble a little bit,” said Hodes.
Gov. Gavin Newsom said Friday that he had been briefed on the incident and that “the longer-term impacts, as relates to gas prices, still need to be determined.” He added that “it is an area of real sensitivity.”
he South Coast Air Quality Management District documented elevated levels of some pollutants at the fenceline of the refinery overnight, but the levels went back to background in the morning, according to agency spokesperson Nahal Mogharabi.
The Environmental Protection Agency regional office in California had not received requests from state officials for assistance Friday morning. A spokesperson noted that the agency’s emergency response activities were exempted from the ongoing government shutdown.
Context: The fire comes at a tricky moment for California’s gasoline market. In the fall, refineries switch over from producing a summer blend of gasoline to a winter blend and often use the changeover as a chance to take facilities offline for maintenance. During those periods, the amount of gasoline being produced in the state slows, which can trigger price increases.
Last month, Tai Milder, the director of the California Energy Commission’s Division of Petroleum Market Oversight, sent a letter to Newsom warning that a gasoline production reduction was incoming this fall.
The fire could exacerbate that crunch. If Chevron must pause gasoline production at the El Segundo refinery, suppliers can turn to foreign markets to import petroleum products to fill the gap. But there would be a several-week lag time before foreign imports from East Asia would arrive at the California coast.
State leaders have few levers to pull to alleviate any short-term price spikes. One option could be to ask other refineries in California to delay maintenance work if production is halted in El Segundo. Another could be for Newsom to allow refiners to switch over to the state’s cheaper-to-produce winter gasoline blend early.
When asked Friday whether he would take action on the winter gasoline blend, Newsom said the California Air Resources Board was the expert on the topic, and “that decision should be made with recommendations forthcoming from CARB very, very shortly.”
CARB and the energy commission did not immediately reply to requests for comment.
Reaction: The fire spurred a wave of backlash from environmental advocates who were already furious with Newsom for signing his oil-friendly energy package and allowing regulators to delay a refinery profit cap.
“This massive fireball shows how dangerous aging, fire-prone fossil fuel infrastructure is to our communities,” said Christina Scaringe, California climate policy director at the Center for Biological Diversity. “It’s outrageous that our state legislature just rammed through a bill aiming to prop up refineries that pose clear dangers to Californians.
The next big oil regulation fight focuses on whether the CEC will force gasoline refiners to guard against price spikes by keeping extra supplies on hand for when they go offline because of a fire or other unexpected interruptions. The agency received the authority to require the stockpiling in the 2024 bill AB X1-2.
“Californians are left defenseless against gasoline price spikes because there are no rules to force oil refiners to resupply the lost fuel after a refinery outage or to maintain minimum inventories,” said Jamie Court, president of Consumer Watchdog, in a statement. “The Governor signed the law about one year ago, yet his California Energy Commission hasn’t drafted rules and is slow walking the process.”
Tyler Katzenberger contributed to this report.
