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Blast Cuts Refining Capacity

Texas Explosion Not Expected to Create Gasoline Shortage or Price Spike

By Justin Blum
Washington Post Staff Writer
Friday, March 25, 2005; Page E01

An explosion at a major BP refinery in Texas on Wednesday, which killed 15 people and injured more than 100, should not lead to gasoline shortages or significant price increases at the pump, analysts said.

Officials with the London-based company said that damage to its Texas City refinery would reduce gasoline production by about 5 percent or less a day. That would amount to about 500,000 gallons a day taken off the market -- slightly more than one-tenth of a percent of overall U.S. gasoline production.

Texas City firefighters pour water on a smoldering unit at the BP refinery. (Brett Coomer -- Houston Chronicle Via AP)

The company and federal investigators have not yet determined what caused the explosion. BP is uncertain how long it will take to repair the equipment.

The explosion is the latest of several mishaps at the refinery. Two workers died there in September after they were burned by superheated water.

"This incident is one of the worst I can recall in my career with BP," the company's chief executive, John Browne, who was at the refinery yesterday, said in a statement. "Our compassion goes out to the families and friends of the dead and injured."

The loss of refining capacity comes at a time when crude oil and gasoline prices are hovering around record highs because of strong worldwide demand that is pushing global production to its limits.

The news immediately sent prices higher on futures markets on Wednesday. Prices receded yesterday morning, then moved up later in the day. Traders said the increase was largely unrelated to the explosion. U.S. benchmark crude for May delivery closed on the New York Mercantile Exchange at $54.84, up $1.03 from the day before.

Oil analysts said they did not expect any significant rise in prices at the pump as a result of the explosion. They said gasoline inventories are within their normal ranges and that there is still time to repair the refinery before the summer driving season sends demand higher. "I don't think there would be much of an impact," said Doug MacIntyre of the U.S. Energy Information Administration, an arm of the Energy Department.

The average nationwide price of a gallon of regular gasoline was $2.116 yesterday, a record high, according to the AAA auto club. Adjusted for inflation, gasoline prices peaked in 1981.

Officials from the Occupational Safety and Health Administration, the U.S. Chemical Safety and Hazard Investigation Board and other government agencies are investigating the explosion.

OSHA has cited the refinery in connection with several accidents in the past year. This month, the agency fined BP $109,500 for violations in connection with a September accident that killed two workers and injured a third. The company is contesting the fine.

BP also was cited in connection with a March 2004 explosion that did not injure any workers. The company was assessed a $63,000 fine that was later reduced to $13,000 after the company agreed to make safety improvements, OSHA spokesman Albert Belsky said.

Officials at BP said the refinery's overall safety record was good and had been improving in recent years, despite those accidents. "We think this is a safe refinery and we work hard throughout our system in BP to continuously improve safety," said Michael Hoffman, who oversees BP's worldwide refining.

The explosion happened in an area of the refinery that makes components to boost octane in gasoline. That part of the 1,200-acre facility was being brought back online after routine maintenance.

The workers who died were all contractors who were meeting in a nearby construction trailer and were not working on the unit that exploded, BP officials said. The officials were uncertain whether workers were in the area immediately surrounding the explosion.

Yesterday evening, a spokesman for the University of Texas Medical Branch at Galveston said that eight people were listed in critical condition; 10 were either in serious, fair or good condition; and five had been discharged.

The refinery, located southeast of Houston, is the third-largest in the United States. It can process as many as 460,000 barrels of crude oil a day and accounts for about 3 percent of the fuel consumed in the United States.

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