Analyst: Coffeyville Refinery Closure To Raise Gas Prices

Tuesday, July 3rd 2007, 5:58 pm

By: News On 6

WICHITA, Kan. (AP) _ Midwestern states that depend on fuel supplies from the flooded refinery in Coffeyville will see some of the highest prices in the nation for gasoline and diesel this summer, industry experts said.

``It is really bad timing, it is bad luck. ... For all intents and purposes it looks like that refinery is not going to be contributing any gasoline or diesel fuel for the rest of the summer,'' said Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service.

Normally at this time of year, Kansas wholesale prices trade at a nickel above the Gulf Coast, but on Tuesday they were trading 25 to 30 cents above Gulf Coast prices, Kloza said.

Although the Coffeyville refinery contributes less than 1 percent of the nation's gasoline production, it represents a healthy chunk of Great Plains production, Kloza said.

That will especially affect gasoline prices in Oklahoma, Kansas, Nebraska, South Dakota, North Dakota and Minnesota _ states that had recently seen a drop in gasoline prices.

Up until the flood, those states would have had gasoline prices at or below the prices of a year ago. Now they will instead see prices closer to $3 a gallon for the rest of the summer, Kloza said.

``Kansas and Oklahoma always show up with some of the cheapest prices in the country _ that is probably not going to be the case for this July and August,'' he said.

Coffeyville Resources produced 108,000 barrels per day of gasoline, diesel and other fuel oils. The facility is one of three refineries in Kansas. The others are in McPherson and El Dorado.

Coffeyville Resources said Tuesday it will not know the extent of damage from the record high floods until workers can get in and do a thorough assessment. The entire refinery and nitrogen fertilizer plant are under 2 to 6 feet of water from the overflowing Verdigris River nearby.

``We are beginning to see the water recede,'' said company spokesman Steve Eames. ``We still don't know how long it will be.''

The company cannot estimate when it will resume operations until workers can fully assess what needs to be replaced or repaired to bring the refinery back up safely, he said.

Kloza said that based on the photographs he has seen of the facility, it will probably be sometime after Labor Day before the plant can be back in operation. The Coffeyville plant may fare better during the flood than refineries flooded by hurricanes because it will not have to deal with corrosive saltwater.

``It is going to be tough losing the two biggest demand months of the year, and you have to hope to be back in shape for diesel production when harvest time comes back,'' Kloza said.

Ed Cross, executive vice president of the Kansas Independent Oil and Gas Association, said he expected the closure to affect gasoline supplies because the nation is pretty close to its refining capacity.

``While Coffeyville is not the largest refinery in the nation, it could have an impact on gasoline prices,'' Cross said.

Coffeyville Resources workers have gone into the facility by boat to do a preliminary assessment. That examination and monitoring by air, indicated that the refinery tank that initially overflowed has been contained, Eames said.

An estimated 42,000 gallons of crude oil spilled from the refinery Sunday, coating everything it touched with a slimy layer of black gunk.

The Coffeyville spill is not anywhere near the spill that occurred at the Murphy Oil refinery in Meraux, La., during Hurricane Katrina. About 1 million gallons of oil spilled into neighborhoods next to the tank farm. The massive spill came after Katrina's floodwaters lifted a storage tank off its foundation and moved it more than 30 feet.

Coffeyville Resources said Tuesday it will continue gathering crude through its leases as normal during the shutdown _ storing, reselling or trading the supplies until refining operations resume.

The company also plans to keep its nearly 600 employees, most of whom work in Coffeyville, on the payroll.

``There is no shortage of work to do here now,'' Eames said.

For more flooding information, check out our STORM ZONE web page.