Another upset at the Torrance Refinery

November 17, 2016 By , ,

November 16, 2016

The former ExxonMobil refinery in Torrance, CA experienced an upset this week. As news helicopters circled above, the local fire department fought a fire that appeared to be in the alkylation unit. Thankfully, the media were reporting yesterday that there were no serious injuries. Today, OPIS reported that the refinery was back operating at full rates, although we cannot confirm the alkylation unit status.

Even without a significant impact on gasoline production (and more visibly, retail prices), this event will increase existing pressure on state and local officials by the public to reduce community impact and enhance safety of the refinery. This includes a possible alkylation technology change, on which the SCAQMD has already released a scoping study. Such a technology change would require a significant investment by the refinery’s new owner, PBF Energy.

From a consumer perspective, should the refinery quickly return to full production we would not expect price increases like those that accompanied the explosion of the electrostatic precipitator (ESP) in 2015. However, should the refinery’s gasoline production be affected, we expect it can easily be offset by the normal gasoline pool swell due to winter volatility specifications (November 1 through the first week of February). We would not expect significant retail gasoline price impact, although it could have ended the recent slow decline.

From the refiner perspective, an extended production disruption might have somewhat strengthened recent very weak refining margins in California, although this so-called benefit would probably be overwhelmed by the negative publicity from another reliability-driven price increase.

It is still early, and we are basing our thinking on publicly available information. There are always (at least) three versions of an incident: what’s really happening, what media tells us is happening, and what the rumor mill tells us is happening. We may yet see rumor-driven behavior in this market as we saw in 2015 when rumored restarts of the ESP drove interesting behavior in the shipping business.

Contact Information:

David Hackett
888-643-0197 x701
[email protected]

Robert Jaques
General Manager
888-643-0197 x713
[email protected]


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