With Alaskan oil crimped, Californians look for options
Maybe California needs its own Strategic Petroleum Reserve.
After hurricane Katrina interrupted oil production from the Gulf of Mexico, President Bush quickly opened the spigots of the nation's emergency oil supply to provide crude oil once the region's refineries were back up and running.
With BP shutting down most of the production from Prudhoe Bay, Alaska, the nation's largest oil field, the Department of Energy has once again offered to supply oil from the Strategic Petroleum Reserve (SPR), located in Texas and Louisiana.
It won't be so easy this time.
Delivering crude from the Gulf of Mexico to California will take at least 14 days, say energy experts. This includes a 24-hour passage through the Panama Canal, which can accommodate only relatively small tankers. Getting refined product to California is even more difficult, because the state requires a special gasoline blend designed to cut down on pollution.
The result? Californians will just end up paying more to tank up, most experts say.
"Over the short run – the next two to four weeks – we could see some spike in gasoline prices here," says Severin Borenstein, director of the Energy Institute at the University of California, Berkeley. "It will take some time to rearrange shipping to bring crude or product to the West Coast, so I would say the spike would not be more than 20 cents a gallon."
Californians already pay some of the highest prices in the US. The state average for regular unleaded gasoline as of Tuesday morning was $3.15 a gallon, up four cents from Monday's $3.11, reported GasPriceWatch.com. Only motorists in Connecticut and Hawaii pay more, says the website's Brad Proctor.
High prices may well become a political factor here this fall, when Gov. Arnold Schwarzenegger (R) is up for reelection.
"How much you blame the governor versus Washington is always an issue," says Dennis Jacobe, an economist at the Gallup Organization in Washington. "It shows our vulnerability."
Then, too, Californians' reactions to high gasoline prices have always been a bit unusual. For example, in Palo Alto, David and Bonnie Sachs aren't waiting for a strategic petroleum reserve or for the government to dole out dollars to fix the problem. They want their leaders to plan for the day when petroleum is no longer king.
"I look at the broader issues, [and] that corroded pipe is emblematic of why I don't want to see the federal government allow more drilling in the Alaskan wilderness. It's such a short-term fix.... I think both the state and country have to plan for the day when there won't be any petroleum," says Dr. Sachs.
San Franciscan Ryan Hledik, who pours $50 worth of gasoline into his Ford Explorer every two weeks, says there ought to be higher taxes. "I hate high gas prices, but at the same time I think we are too dependent on oil in the Middle East," he says. "If we had a higher tax on gasoline, it would encourage investment in other technology that would eventually decrease our dependence on oil."
Will it affect how they vote in midterm elections this fall? Yes, says Ms. Sachs. "It puts consumers in a vulnerable position – what can we do except for oil conservation and electing different officials," she asks.
California's refineries have a relatively abundant supply of crude oil on hand, say petroleum industry experts. This could help the refiners get through the immediate, short-term squeeze. In addition, refiners in the state are geared toward processing some of the worst crude oil in the world, says Joseph Sparano, president of the Western States Petroleum Association in Sacramento.
"Our indigenous crude is heavy and high in sulfur, and that may be what is available where there is a surplus," says Mr. Sparano.
Oil experts also note that the oil companies are adept at moving large tanker-loads of oil from one location to another. This is where reserves in the Gulf might come in. Oil stored there might be shipped to a nearby refinery, which then sends oil it had purchased to California.
"It's a big shell game out there," says Tim Considine, an SPR expert at Pennsylvania State University. "If you take oil out of the SPR, it might free up oil elsewhere in the world. This is what oil companies are really good at."
Another possibility for California is to import fuel from Asian refiners, says Rick Mueller, an analyst at Energy Security Analysis in Wakefield, Mass. "We can look for Korea and Taiwan refiners to export more to meet California demand," he says. "It just gets more expensive."
After the initial spurt, prices will level off, Mr. Borenstein predicts. Over the longer term, he expects a change of only about 5 cents a gallon. "We will just import a bit more," he says. After hurricane Katrina, imports from Europe helped bring prices back down on the East Coast.
• Lauren Dake contributed to this report.