California's independent marketers of refined products have called for suspension of the state's reformulated fuels requirements during supply squeezes.
After a brief honeymoon following introduction of California's Phase II reformulated gasoline (RFG) specifications Mar. 1-and perhaps mindful of the supply debacle that accompanied the introduction of tougher spec diesel in the state in 1994-the state's independent marketers are urging Gov. Pete Wilson to suspend the stringent fuel specs when supplies fall too low or prices jump too high.
California Independent Oil Marketers Association (Cioma), which represents about 500 gasoline and diesel sellers in the state, asked Wilson to suspend the clean fuel specs for gasoline and diesel fuel until supply can meet demand. It also called for a trigger mechanism keyed to supply and price that will allow the state to avoid such situations in the future.
Price spike
Cioma claimed wholesale prices of Phase II RFG have jumped as much as 32/gal over conventional gasoline. The group blames the recent runup in crude oil prices and problems at two state refineries for the spike in RFG prices.
Meanwhile, the association says marketers in Bakersfield, Stockton, and Chico recently saw diesel allocations fall to as little as 50% of normal levels.
Cioma estimates wholesale diesel prices have risen 28/gal in the state since Mar. 1
Cioma is especially anxious about the timing of the price spikes because farmers who depend on diesel fuel could experience supply problems at the height of spring planting and because gasoline prices are climbing for wholesalers during spring holidays.
Wholesalers are further caught in a squeeze because major refiners are not passing through price increases to the pump at their retail outlets.
Under California Air Resources Board (CARB) rules, Phase II RFG is not required at the pump until May. However, CARB estimates most of the gasoline sold in the state meets its new specs.
Cioma contends it is not opposed to the new spec fuel, with Government Affairs Director Evelyn Gibson saying, "It's the only way our members will stay in business."
Still, Gibson says, the association is frustrated because CARB "assumes the market will take care of itself at the expense of our members."
Problems at refineries
While refinery problems have not been widespread, ARCO recently received a variance from CARB to produce as much as 30,000 b/d of conventional diesel fuel for 10 days through Apr. 10 after finding a leak in the hydrogen unit at its 237,000 b/d Carson refinery during a scheduled turnaround.
ARCO said the problem has been corrected and the variance was not even used for the full term.
In the San Francisco Bay area, an Apr. 1 explosion at Shell Oil Co.'s 136,000 b/d Martinez refinery has not measurably reduced supplies, the company said.
The explosion damaged two of the plant's hydrotreating units, but Shell expects to meet customer needs through trades with other refiners as well as remaining inventories at the Martinez refinery. A gasoline hydro- treater was extensively damaged, while a cat feed hydrocracker received damage only to connecting piping.
The apparent cause was a pipe failure in the gasoline hydrotreater, Shell said.
There were no injuries. At Oil & Gas Journal presstime last week, no estimates had been given for the total extent of damage or timetable for repairs.
CARB has always considered the possibility of brief, isolated shortages in the rollout of new spec fuels. However, the agency notes that diesel prices on the West Coast recently have been lower than on the East Coast despite the refinery problems and were dropping further when Cioma wrote Wilson Apr. 5.
"They never came to us for relief first," CARB said.
The agency noted it created the variance process in the first place to remedy problems in the market but adds ARCO was able to fix its unit so quickly the variance went largely unused.
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