Tuesday, Aug. 19, 2003 | 11:15 a.m.
SUN STAFF AND WIRE REPORTS
A gas crisis in Phoenix could spread to Las Vegas and the possibility is already leading to an increase in prices at the pump, industry officials said.
Because of a gas shortage in Phoenix, there is a fear that fuel scheduled to go to Southern Nevada could be diverted to Phoenix, according to Keith Stewart, a director of the Nevada Petroleum Marketer's Association.
Las Vegas gas stations are reporting higher prices because of the crisis in Phoenix, according to AAA.
Gasoline become a commodity in short supply in Phoenix this week after safety concerns shut down a pipeline that delivers a third of the city's supply. A July 30 break in the pipeline forced the operator to shut the line down Aug. 8.
Already Las Vegas gas prices have been affected. The local price per gallon jumped six cents overnight to $1.78, Lisa Foster, a spokeswoman for AAA, said.
That may be as much the result of worry as any actual supply problem, Foster said. If drivers panic and start fueling up to prepare for a shortage, that could further drive up prices, she said.
Sharon Johnson, a manager of the 7-Eleven station at 9011 W. Flamingo Road, said the cost of regular unleaded gas went up overnight from $1.76 to $1.81 as a result of the pipe problem in Phoenix. Trucks are bringing in the gasoline to the station.
"It's costing us an arm and a leg," Johnson said. "I hate it. I hate to raise the prices but I have to cover the cost. I use gas too and everytime it goes up I shudder.
Krueger said that more fuel may be pumped into the Phoenix pipe instead of Las Vegas.
"It's a case of deciding to sending fuel to Phoenix instead of Las Vegas," he said. "The normal schedule could be altered by the demand in Phoenix."
There are no gasoline refineries in Arizona, so all the fuel must be delivered through pipelines operated by Kinder Morgan Energy Partners of Houston. A pipeline that brings gasoline from California remains in operation. Kinder Morgan also has a pipeline from California to Southern Nevada.
Rick Rainey, spokesman for Kinder Morgan, said the decision about who gets the gas is made by refineries. The pipeline company has no control of how much to send and where to send it.
"As far as supply side goes, we're capable of handling anything they want to ship," Rainey said.
Phoenix needs 175,000 barrels of gasoline daily, Rainey said. The California pipeline now is meeting 93 percent of Phoenix's supply, he said, with 7 percent being met by other sources such as trucks from El Paso, Texas.
The company is testing the pipelines to Phoenix this weekend and the broken pipes should be fix at the end of the week, Rainey said.
Compounding the situation are mechanical problems at refineries in California, said Anita Mangel, spokeswoman for Western States Petroleum, a major trade industry representative.
"Unfortunately when you have one thing happen in the industry it is going to affect conditions, but when you have a combination of things, such as the pipeline situation (in Phoenix) and refinery upsets, the problem is magnified and you see it in the current market conditions at the pump."
Jon Ballesteros, spokesman for the Tesoro Refinery just outside Martinez, Calif., near San Francisco, said his plant is still recovering from a mechanical failure that shut down one 5,500-horsepower engine. It has led to an unspecified shortfall in gasoline production.
Prices may remain high even after the pipes in Phoenix are fixed because Labor Day is approaching and more travelers head out on the road as summer ends, she said.
Krueger said the possible shortage could affect the already rising price of gas, but wholesalers have been trucking fuel into Phoenix at an added cost to make sure there's plenty of fuel.
"Our members have been trucking fuel to be sure to their customers are supplied. People don't like high prices but they also don't like seeing stations out of fuel or shut," Krueger said.
In addition, the fuel treated to reduce air pollution, now required in Clark County, may become harder to find as the shortage worsens, so that may also cause a gas price hike.
Stewart said the concern for Las Vegas is that if Las Vegas were to have a similar incident, the city has only one pipeline and no backup.
Meanwhile, Arizona Gov. Janet Napolitano urged Phoenix-area motorists to not guzzle up the city's limited gas supply.
"Please do not hoard," Napolitano said. "Think of your fellow citizens."
Napolitano's plea came as the nation's sixth-largest city faced a severe gas crunch for a second day Monday, once again sending motorists driving from station to station looking for fuel.
On Monday, drivers found stations with the pumps blocked off by yellow caution tape, or with lines that stretched a block or more. One gas station attendant called police because some patrons were getting upset and others were cutting in line.
Everywhere, prices hovered around $2 a gallon.
Judy Bergeron searched for three hours and stopped at five stations before she found gas.
"I never knew that gas was going to seem like gold," said Bergeron, who waited 45 minutes at her final stop.
Nationally gasoline prices appear poised to set records in the next few weeks.
The reasons include, but go well beyond, last week's blackout in the Northeast. The power outage disrupted production of 500,000 barrels of gas a day at four U.S. and four Canadian refineries, according to the Oil Price Information Service. That's a loss of roughly 5 percent of the 9.2 million barrels of gas U.S. drivers use daily.
A gallon of regular averages $1.627 nationwide, the Energy Information Administration reported Monday. That could jump 10 to 15 cents, the administration and industry analysts say, tying or breaking the record $1.728 set in mid-March.
Fires, breakdowns and storm damage at California refineries in July and earlier this month already had begun boosting prices nationwide. West Coast gas distributors, nervous about supplies, are paying record wholesale prices.
"When wholesale gas is $1.50 or $1.60 on the West Coast, and you've got a boatload on the water heading somewhere that pays less, you say, 'Well, I can afford the tariff to turn around and go through the Panama Canal' " and sell the gas in California, says Tom Kloza, an analyst at the Oil Price Information Service.
Sun reporters
Afsha Bawany, Ed Koch and the Associated Press and USA Today contributed to this story.
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