Published Friday, January 19, 2001

Two gasoline suppliers lose power for 18 hoursy interruptions , causing gas suppl POWER CRISIS BY TEENA MASSINGILL

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TIMES STAFF WRITER

California's electricity crisis could quickly lead to a shortage of another crucial form of energy: gasoline.

Making a desperate energy situation even worse, two of the major gasoline suppliers in California lost power Wednesday and Thursday, stopping their flow of gasoline and diesel fuel to the companies that then supply gas stations, schools, hospitals and fire departments.

The shortage will almost certainly mean higher prices at the gas pump in the next few days. Already wholesale prices have gone up 10 to 15 cents a gallon in the last 24 hours, according to one industry official.

Kinder Morgan Energy, which has an extensive pipeline and distribution system in California for gasoline and other fuels, was without electricity most of Wednesday and Thursday. It transports 800,000 to 900,000 barrels of finished fuel through its pipelines each day.

"We were down for 18 hours (Wednesday). It's going in six-hour increments and we don't know what's going to happen in the next few days," said Larry Pierce, a spokesman for Kinder Morgan.

GATX, which runs pipelines carrying gasoline, jet fuel and diesel from Los Angeles to Las Vegas, is the other company affected. It delivers about 100,000 barrels of gasoline to Las Vegas each day. It lost power for 18 hours Wednesday and Thursday.

GATX and Kinder Morgan are a part of an interruptible electricity program with Pacific Gas & Electric in which the participants agree to cut electricity usage during a power crisis in exchange for lower PG&E rates.

The gasoline industry reacted Thursday with higher dealer-to-dealer gasoline prices in California, a cost that will probably be passed on to the consumer.

"Prices have already started climbing at the rack. It's gone about 10 to 15 cents higher in the last 24 hours," said Jeff Poarch, sales representative and spokesman for Concord-based Redding Petroleum, which operates gas stations in the Bay Area.

Ironically, the news comes just two days after a survey showed that California's drivers are finally enjoying some relief from high gas prices. The monthly gas-price report by AAA of Northern California showed that the average cost of regular unleaded self-serve gasoline has dropped 12 cents in the Bay Area and 13 cents in Northern California since mid-December. At the time AAA said the only factor that could drive gas prices back up would be overreaction to the news that OPEC plans to cut its oil production by 1.5 million barrels a day.

GATX and Kinder Morgan operate pipelines that carry finished gasoline, diesel and jet fuel for many refiners, and they distribute those products to middlemen at supply terminals throughout the state. When the pipelines go dry and the terminals close, the middlemen are left without gasoline to buy and sell, leaving less gas for consumers at the pump.

Though GATX and Kinder Morgan voluntarily participate in the interruptible electricity program, several organizations in the oil industry, including the California Independent Oil Marketers Association, want the two companies exempted for selective blackouts. The oil marketers wrote Thursday to Gov. Gray Davis and other state officials asking that electricity not be cut to the two pipeline companies.

Pacific Gas and Electric Co. also sought a waiver allowing Kinder Morgan out of its service-interruption contract, but PG&E spokesman Ron Low said the state Public Utilities Commission denied the request.

The oil marketers reported that the closure of GATX and Kinder Morgan terminals caused a three-hour backup of tanker trucks at other terminals. Oil refineries in the Bay Area that wanted to pump their finished products to the terminals could not, meaning they can no longer make finished gasoline and other fuels until there is a method to deliver those products to the supply terminals. Such backups can bring the entire system to a screeching halt and cause a sudden shortage at gas pumps.

"The harmonics of the pipeline system are very sensitive," said Jay McKeeman, a spokesman for the oil marketers association. "Anytime you create a backlog in terms of delivery in the system, it can easily take weeks to put it back in balance."

After two days of power outages, GATX is reevaluating its participation in the service-interruption program, said George Lowman, GATX vice president of communications. Lowman said the company is also working with Nevada and California officials to avert a major crisis for its customers.

"We have contacted a state senator in Nevada, who has been in contact with the governor, who said he would contact the California governor's office," he said.

Teena Massingill covers small business and consumer issues. Reach her at 925-977-8466 or tmassingill@cctimes.com. The Associated Press contributed to this story.

http://www.contracostatimes.com/news/california/stories/gasoline_20010119.htm

-- Martin Thompson (mthom1927@aol.com), January 19, 2001