Chaos theory at work: Gas price spike and four-legged saboteurs

What do a raccoon and a possum have to do with a 7-cent increase in the wholesale price of gasoline on the West Coast?

As perhaps the most egregious example thus far of just how skittery these markets are, on the night of March 5, at two different locations in the Los Angeles area, within an hour of each other, two hapless animals set off this chain of events:

  • The possum, which got fried in the process, caused a power interruption at a California Edison electrical substation.

  • The raccoon, which also got cooked, interrupted power at a Los Angeles Water and Power substation.

  • Those events disrupted operations for about two hours at an Exxon Mobil refinery and about 10 seconds (yep, that's right: 10 seconds) at a Shell Oil Co. refinery.

  • Next morning, news of the brief refinery disruptions pushed wholesale gasoline prices up 7 cents a gallon.

Talk about chaos theory at work!

However bad we in the South have had it with a 40-cent rise in gasoline prices over the past few weeks, Californians have really felt the pain, with prices well over $3 per gallon (San Francisco had the nation's highest price at more than $3.70). Analysts are predicting that $3-and-up will be commonplace around the country as the summer driving season sets in.

This at a time when crude oil prices have been falling and OPEC ministers have been wringing their hands over declines in their zillion-dollar revenues.

The problem, we're told once again, lies with the lack of refinery capacity.

There's not enough capacity to meet constantly-growing demand, even when everything's running at better than 95 percent.

When there are shutdowns — as there have been recently due to switching over to summer-grade fuels, equipment maintenance, and fires and other accidents — supplies get tight and prices go up.

Heaven help us all if a major disaster, such as a hurricane or a terrorist act, gets tossed into the equation.

There are, industry sources tell us, about 150 refineries in 33 states, the majority located in coastal areas. While capacity has been expanded at many existing sites, no new ground-up refinery has been built in the

U.S. since 1976.

Oil companies have closed nearly 25 refineries since 1995, representing almost 1 million barrels per day. This, critics say, has enabled them to keep a tighter rein on supply… and price.

Public opposition — the Not In My Back Yard factor — and strict environmental regulations have helped thwart the building of new refineries. Some opponents of a $2.5 billion plant in a remote Arizona desert area have even lobbed charges of “environmental racism,” whatever that is.

But a corollary result of extremely tight capacity has been that refineries have turned into cash cows for the oil companies. “They're making money hand over fist and crying all the way to the bank,” one industry analyst says.

He adds, “If you think it's bad now, you can't believe how high prices would go if a major chunk of refining capacity were taken out for a lengthy period.”

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