Valero said Tuesday that it will shut its Benicia refinery for five weeks early next year for plantwide maintenance, raising the specter of higher gasoline prices if other plants suffer surprise hiccups at the same time.
The planned 36-day shutdown of the Benicia oil refinery marks the first time since October 2004 that the facility has been completely idled for maintenance efforts, said Bill Day, a spokesman for Texas-based Valero Energy Corp.
The refinery is due to shut in January for the maintenance, known in industry parlance as a turnaround, Valero officials said.
"It's better to do plant turnarounds in the fourth quarter or the first quarter," Day said. "Fuel demand is usually lower. You have less of an impact."
Refiners prefer to avoid major plant overhauls during the six months from April through September, he said.
"It's typically better to avoid doing this in the second and third quarters, which are closer to summer driving season," Day said.
Gasoline prices should not rise because of the Benicia refinery shutdown -- so long as other oil plants that might supply the West Coast operate as expected.
"A planned turnaround shouldn't have that much of an impact, as long as you don't have unplanned outages," said Jim Byrne, an analyst with the Calgary, Alberta office of investment firm BMO Capital Markets. "But you might see some increased prices if there are upsets beyond what's been planned."
Since a recent low in late September of $2.81 in the average price for reformulated gasoline, gas prices have risen 5.7 percent.
Yet plenty more pain could loom for motorists: Since late September, crude oil prices have risen 13.6 percent -- which means gasoline prices might rise even further. Drivers in the Golden State could be squeezed especially hard.
"California historically has been an import market," said Roger Read, an analyst with the Houston office of investment firm Natixis Bleichroeder. "There is not enough refining capacity on the West Coast to supply all of California."
So that means there's little capacity to spare if unexpected refinery shutdowns surface.
"If you have an unplanned outage, suddenly you are competing with the world for gasoline products," Read said. "Given the logistical challenges of getting products to the West Coast, that makes things more expensive."
All told, Valero, the nation's largest refiner, said it plans maintenance projects at five refineries during the first three months of 2011. Besides the 170,000-barrel-a-day Benicia refinery, the other plants affected during the first-quarter repairs are:
Valero determined that widespread work was needed to maintain the Benicia refinery.
"It made more sense to take the whole plant down, do all the work at once, and have the time to bring the plant back up and do it safely," Day said.
Contact George Avalos at 925-977-8477.