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Calif. governor orders state begin move to winter-blend gasoline

Source: Thomson Reuters Foundation - Mon, 8 Oct 2012 00:04 GMT
Author: Reuters
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HOUSTON, Oct 7 (Reuters) - Governor Jerry Brown on Sunday ordered California pollution regulators to allow service stations to begin stocking winter-grade gasoline after a string of refinery and pipeline problems choked off supplies and sent the state's pump prices to record levels.

With gasoline prices topping ${esc.dollar}5 a gallon in some areas and several Los Angeles stations running out of fuel, Brown sent a letter to the California Air Resources Board, authorizing them to allow retailers to begin selling winter-blend gasoline ahead of the traditional Oct. 31 transition from summer grade fuel.

Winter grade gasoline is generally easier to make than fuel for the summer, which is processed to generate less smog during the peak driving demand season.

"Allowing refiners to make an early transition to winter-blend gasoline could quickly increase fuel supply and provide a much needed safety valve with negligible air quality impacts," Brown said in a letter on Sunday to the California Air Resources Board, which regulates the types of gasoline sold in California.

California is the largest gasoline consuming state, but it is virtually cut off from the main U.S. refining centers in the Gulf Coast and the Midwest due to a lack of pipelines to carry fuel across the Rockies. This leaves the state open to price spikes when the regional refineries it relies on are shut.

The average retail gasoline price in California hit a peak of ${esc.dollar}4.614 a gallon on Saturday, compared to a national average price of ${esc.dollar}3.8338 a gallon on Friday as refinery outages and pipeline outages squeezed supplies.

A fire shut the key crude refining unit of Chevron Corp's 245,000 bpd Richmond, California, plant on Aug. 6. On Oct. 1, prices rose on news of a power failure at Exxon Mobil Corp's 149,500 barrel per day (bpd) Los Angeles-area refinery in Torrance, California, though the company said operations were restored by Friday.

In addition, a Chevron pipeline that carries crude oil from the state's Central Valley to refineries in the San Francisco Bay area has been closed since mid-September.

Analysts said the decision to move up California's transition to winter gasoline would give a significant boost to the fuel pool.

"Gasoline supply will go up 10 percent with the change to winter-blend gasoline," said David Hackett, president of Stillwater Associates, an Irvine, California, energy consultancy. "That's like adding a whole California-sized refinery. That's like adding another Exxon Torrance."

Reduced gasoline availability has forced some retailers to turn off their pumps, with Costco to shut 14 of 40 gasoline filling stations.

Earlier this week, the California Energy Commission said there was adequate gasoline supply across the state, but some local areas were seeing tighter supply. (Reporting by Erwin Seba; Editing by Diane Craft, Bernard Orr)

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