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Japan's post-quake fuel imports not likely to come from California

March 22, 2011 |  1:23 pm

And you thought the high cost of doing business in California was a bad thing. For the state's motorists, in the case of earthquake- and tsunami-racked Japan, it might actually be a good thing.

CA_grph Refinery companies around the world, including some in the U.S., have been gearing up to help meet Japan's post-disaster fuel needs after its refinery production was knocked down to 2.7 million barrels a day from about 4 million barrels a day March 11, according to the Petroleum Assn. of Japan.

Japanese officials expect to have their production back to 3.4 million barrels a day by the first week of April. Japan is also canceling fuel exports. But three refineries are still completely shut down, leaving quite a hole in terms of gasoline, diesel and heating-oil production.

California drivers, who already pay some of the highest gasoline prices in the U.S. at more than $3.96 a gallon for regular fuel, might have gotten caught up in a supply squeeze that could have raised prices even higher if West Coast refinery operators diverted some of their California production to help out Japan.

Executives at Valero Energy Corp. of San Antonio, for example, which operates two California refineries, including one in Wilmington, had assumed that any fuel they might sell to Japan would most sensibly come from the West Coast. They were wrong.

A Valero spokesman said that the regulatory and environmental requirements, the costs of production, labor and electricity are so much higher in California than the company's costs in other parts of the U.S. that any fuel Valero might send to Japan won't be coming from here.

"It would be cheaper for us to take fuel from our refineries in the Gulf [of Mexico region], put it on a tanker and send it through the Panama Canal to Japan than to send it from California," said Valero spokesman Bill Day, adding that company executives were "surprised" when they looked at the costs.

A gallon of regular gasoline in California today is selling for an average of $3.969, up 0.1 of a cent overnight, according to the AAA Fuel Gauge Report.

California recently had the nation's most expensive gasoline but has since dropped down to its more-common third-place ranking behind Hawaii, at a average of $4.115 a gallon, and Alaska, at an average of $3.986 a gallon.

-- Ronald D. White

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