Shell Oil Co. found a buyer for its once-doomed Bakersfield refinery Monday, a move that might keep keep California’s notoriously volatile fuel prices from going higher.
The aging refinery produces 2 percent of California’s gasoline and 6 percent of its diesel. But given the extraordinary tightness of the state’s fuel market, Shell‘s original plans to close the refinery prompted protests from consumer advocates, elected officials and others. One leading energy economist said the plant’s closure could lead to price spikes of 10 percent or more during times of peak demand.
Shell backed down under public pressure and agreed to look for a buyer. On Monday it said it will sell the plant to Flying J Inc., a Utah-based oil company that owns a chain of truck stops. There are six Flying J’s in California, including one in Lodi.
“Clearly this is a triumph for consumers and regulators,” said Jamie Court, president of the Foundation for Taxpayer & Consumer Rights in Santa Monica.
“Ultimately, Shell did the right thing but we had to drag them through Hell’s Kitchen to do it,” Court added. “It’s remarkable that it took consumer groups, whistle-blowers and regulators to force Shell to sell this facility. If Shell had its way, they would have shut this facility in October.”
Shell spokesman Stan Mays said, “We were always open to the possibility that somebody might want to buy the facility.” The company “initiated a pretty aggressive sale process” once it realized there were interested buyers, he said.
Terms weren’t disclosed. But Court and a source close to the negotiations said Flying J will pay $130 million for the refinery.
The Bakersfield site will supplement oil that Flying J gets from a small refinery north of Salt Lake City. The company was looking to “add to our refining capacity” in order to serve its retail locations around the Western states, said Jeff Utley, the company’s senior vice president for refining.
The deal is to be completed by March.
Shell had said the Bakersfield facility was too old and too small to keep running. It also pledged to bring in fresh supplies from other locations to partly offset lost production from Bakersfield.
But as California gasoline prices reached record levels last year, pressure on Shell mounted.
Keeping the refinery open won’t solve California’s fuel problems, Court said. “We had a tough summer (last) year even with Shell pumping,” he said.
Gas prices hit a record $ 2.45 for an average gallon of self-serve regular in California in October. On Monday the average was down to $ 1.96. But some experts think prices could rise again soon as refiners start cutting back production to prepare for the changeover to summer-grade fuel formulas.