HOT WEATHER COULD HIT GASOLINE SUPPLIES

LAKEWOOD, NJ (Opis Energy Group) -- May 10, 2000 -- Last summer saw some refiners hit by brownouts and blackouts as heat waves in the U.S. northeast boosted electricity demand and overtaxed the power grid. While those outages occurred in July and August, heat-related disruptions this year are more likely to occur in May and June, just as refiners are struggling to produce the new Phase II reformulated gasoline due at retail outlets June 1.

The forecast of Michael Schlacter, chief meteorologist for the consulting firm Weather 2000, comes as no surprise to residents of the Northeast who have seen the mercury rise into the 90s this week.

"We are very confident that it's going to be a warmer-than-normal summer, and May and June will be the most intense heat-wise for the Northeast relative to historical normals," Schlacter said. "We expect a return to more normal temperatures for July and August, without a repeat of the anomalies that we experienced last year."

Sporadic power outages would only further complicate what has been a somewhat rocky start to supplying the new summer Phase II RFG gasoline that was due to distributors May 1.

Some U.S. refiners are having difficulty meeting the new specifications and are producing less RFG than they did last year. Meanwhile, two large blenders -- Northville Industries and George E. Warren -- recently indicated that they would not make Phase II RFG until assured that they would not be infringing upon a Unocal patent by making the fuel. And some suppliers have allocated reformulated gasoline liftings, fearing product snags and dislocations.

In the U.S. Northeast, some refiners could be more susceptible to power outages than others. Last year, several key units at Sunoco's 130,000 b/d Point Breeze, Philadelphia, refinery complex were shut down because of a July 5 power outage that occurred during a week-long heat wave. That same week, Motiva was forced to cut back rates at its 152,000 b/d Delaware City refinery by 14 percent due to problems cooling off refinery units.

Recent developments could reduce the likelihood of outages at some refineries. Motiva's Delaware City plant is a case in point. Motiva next week will begin the startup of the Delaware Clean Power Project, in which coke from the refinery will be used to create steam and generate electricity. Whereas Motiva-Delaware City's previous cogeneration capacity left it as a net importer of about 15 megawatts per day, the new power project will turn the refinery into a net exporter of about 30-40 megawatts per day.

Other Northeast refiners are similarly protected from problems with the power grid. Valero's Paulsboro, New Jersey refinery features cogeneration and at times is a seller of electricity. Meanwhile, Tosco has entered into an agreement with a utility to receive what it calls "uninterruptible service" for its Linden, New Jersey, refinery.

The Northeast power supply situation could become more clear late next week, which is when the Northeast Power Coordinating Council plans to release its summer assessment.

- Brad Addington (baddington@opisnet.com)

Copyright 2000, Oil Price Information Service.



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