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Friday, 8 June, 2001, 21:46 GMT 22:46 UK
Oil wants blackout exemptions
San Francisco at night
When the lights go out in California, the oil companies may still go on
California Governor Gray Davis has asked the utility regulatory agency to exempt oil refineries from blackouts that may affect the state this summer due to the state's electricity crisis.

Acting in response to reports that California's petroleum output could be cut by as much as a third because of blackouts, Governor Davis petitioned the California Public Utilities Commission (CPUC) to issue an exemption to the state's oil refineries to keep the flow of fuel pumping.

"Even a brief disruption of electricity can force a refinery into total shutdown for weeks," Mr Davis wrote in a letter to the CPUC released on Friday.

"As a result of curtailment, the production and supply of critical petroleum products such as gasoline, diesel and aviation fuels can be jeopardised for several weeks."

Pressure on petrol prices

The threat of less petroleum production will probably result in increased petrol prices in the Golden State, here fuel costs are already the highest in the US, having exceeded $2 (1.40) a gallon.

Governor Davis, already down in the polls as a result of the power crisis that has gripped the state since last summer, cannot chance a rise in petrol prices.

Higher fuel costs have been a sore point with Americans across the country, but nowhere more so than in California where driving is a way of life.

In recent years, Californians and Americans in general had got used to paying not much more than $1.25 as depressed oil prices kept petrol prices low.

In response to political pressure, Governor Davis asked CPUC President Loretta Lynch to categorise refineries as "essential-use" customers, exempting them from future blackouts.

Ms Lynch said she would "take a very hard look at what the governor would like". But she also told the San Francisco Chronicle newspaper that her agency has received about 10,000 submissions for exemption to the rolling blackouts and said she plans to go through them "one at a time".

Oil companies warn

The governor's action on Friday was precipitated by a letter from oil-giant Chevron last week, which warned that it would reduce output at two refineries located in suburban Los Angeles and San Francisco.

Chevron has not yet filed for an exemption to the blackouts, but other refineries have, including the world's largest oil firm, Exxon Mobil Corporation.

Another refinery, Valero Energy, has warned that it has no backup capacity and is very vulnerable to the rolling blackouts, which California officials have estimated could occur 25 to 30 more times this year.

The state so far this year has struggled through six days of blackouts.

For their part, Chevron officials were happy with Governor Davis' call for refinery exemptions.

"We believe exempting refineries and ancillary facilities is in the best interest of California consumers," said Chevron spokesman Fred Gorell.

"We hope the CPUC acts quickly and grants the governor's request."

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