A Merrill Lynch analyst warns that as many as 12 of the nation's gasoline refineries may close rather than invest in the next level of mandated desulfurization that takes effect in 2004 to 2006 — and that these plants could close before new low-sulfur fuel refining capacity comes on stream.
The Blue Island, IL, refinery of Premcor Inc. already has closed, setting off the chain of events expected to create the same type of gasoline supply shortage situation that gripped the nation last summer. Last year's gas shortage, though, was in part due to new requirements for reformulated gasoline (RFG).
The analyst suggests that if all 12 refineries close, it will reduce total gasoline production by 604,500 barrels per day out of total U.S. production of 16.5 million barrels per day. Although this would mean a loss of only 3.7%, it is expected to be enough to cause a shortage-based price jump, perhaps more so in some regions than others.