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Energy The electricity crisis could send gasoline prices as high as $3 a gallon by summer



Blackouts Could Push Gasoline Price Up to $3

Local businesses are preparing for a summer that could send prices for gasoline and diesel fuel as high as $3 a gallon. West Coast energy consultant Phil Verleger said the $3 figure is a rough estimate, based on possible problems that could occur if California’s electricity crisis worsens. Severe electricity shortages could lead to additional blackouts throughout the state. If a refinery loses power, it loses the ability to manufacture fuel, leading to shortages that could send prices skyrocketing, he said. Even a brief loss of power can lead to serious troubles, he warned. “A half-hour blackout at a refinery can cost you up to three to five days of production,” Verleger said. Once a refinery shuts down, he explained, much of the product has to be re-refined to meet California’s environmental specifications.

The effect may be muted, however, since many refineries have their own back-up generation, while the state may declare other refineries off-limits during times of rolling blackouts. Nevertheless, the potential for chaos still exists, he said. “There are three refineries up in Washington we also rely on. And some of the calculations for electricity say we have huge problems for electricity all up and down the coast, and the whole area may lose power a couple of times,” Verleger said. Fuel shortages have the potential to spell trouble for independently owned gasoline stations. Unlike “branded” gasoline, delivered from refineries to stations owned by the oil companies, the independents buy gasoline “off the rack,” or on an as-available basis, said Joseph Balistrieri, owner of North Park Service Center. Ordinarily, the independent gas station owners are able to shop around for a deal on fuel. But when supplies are tight, the independents are supplied only after the refineries serve their branded stations , meaning even higher prices for the independent retailers, he said. That’s happening already, Balistrieri said. “The majors are selling to their dealers 20 to 25, even 30 cents a gallon cheaper than I can buy it,” he said. “It’s just a joke.” With prices expected to rise during the summer, the independents will feel the pinch even more. Some of his independent colleagues have shut down their pumps, keeping open only the adjacent convenience store, Balistrieri said. In his case, he doesn’t know what he’s going to do if his prices rise. He also has a service center on site, with three service bays. Because of his high overhead, he depends on the gas station to make a profit, he said. The trucking industry is already affected by high fuel prices. Don Fritzges, owner of San Diego-based local carrier Golden Chariot, reported he’s paying $1.75 a gallon for diesel fuel right now, which isn’t too far from a peak of $1.90 the trucking industry felt during an earlier energy crisis. In response, Chariot has been adding fuel surcharges to its bills for the past six months. These surcharges, roughly between 5 percent and 8 percent, are typical throughout the entire industry, although some carriers have gone as high as 10 percent, Fritzges said. If fuel costs go up beyond the $1.90 peak, Fritzges may have to increase his fuel surcharges even more. “Everything in transportation is related to fuel. And the more fuel costs, the more we may have to increase our rates,” he said. Burt McGinty, president of San Diego-based Standard Truckline and the local chairman of the California Trucking Association, agreed. High fuel rates means truckers impose fuel surcharges, but due to intense competition, the amount of the surcharge a company can impose is limited. Instead, companies must absorb the added costs. Fuel surcharges only soften the blow of the increased cost of fuel, he said.

In the meantime, everyone in the industry is “hearing rumblings that (fuel costs are) going to go up” even higher, McGinty said. Charles Langley, fossil fuels analyst for the Utility Consumers’ Action Network, doesn’t think prices for fuel will go as high as the $3 figure Verleger has predicted. Instead, he believes the average price for gasoline will hit about $2.30 later this year. Such high prices for fuel are attributable to three main factors: Greed by petroleum producers, the cost of a state-mandated replacement of gasoline additive MTBE with ethanol, and the popularity of sport utility vehicles and other gas-guzzling vehicles keeping demand for fuel high.

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