Wednesday, January 20, 2010

Will Chevron Close Its Richmond Refinery?

By Robert Gammon
Wed, Jan 20, 2010 at 10:51 AM

There’s been a lot of speculation in the past couple of days that Chevron may decide to close its 100-year-old Richmond refinery because of declining revenues. Drew Voros, business editor for the Oakland Tribune and Contra Costa Times, is already blaming environmentalists and liberal members of the Richmond City Council who have fought to stem pollution at the refinery for years, claiming that they’re the causing Chevron to close the refinery. However, an industry expert quoted in today’s San Francisco Chronicle says it’s unlikely that Chevron will pull up stakes in Richmond, because there's too much money to be made in the California market.

Oil market analyst Allen Good of Morningstar market research firm noted that Chevron’s West Coast properties are among its most profitable. In addition, California refineries typically make more money because of the state requirements on blending gasoline. Also, if Chevron were to close its Richmond refinery, it would no longer have a presence in the Northern California market, thereby forcing the oil giant to ship gasoline blended at its Southern California refinery and adding to its costs. “Those refineries may be safe,” Good said of Chevron’s California plants, including Richmond. “It could be some of the smaller ones that they have in the U.S. that could take a hit.”

Chevron has said that it plans to cut jobs and that its domestic refineries are losing up to $600,000 a day, but has not disclosed whether those losses apply to its California plants. The rumored Richmond closure also could be nothing more than saber-rattling in an effort to convince environmentalists to drop their lawsuit which blocked a massive expansion of the Richmond plant last year because of concerns over increased pollution. Chevron also is likely apprehensive by a renewed city council effort to increase taxes on the Richmond refinery to make up for the impacts it causes on the city.

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