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Calif. refinery fire to likely raise West Coast gas prices


A fire struck the core of Chevron Corp's large Richmond refinery on Monday evening, sending flames and a column of smoke into the air and prompting authorities to order nearby residents indoors.

(UPATED 1:39 p.m. Eastern) RICHMOND, Calif. -- Analysts say a fire at one of the country's biggest oil refineries will contribute to higher prices at the pump on the West Coast.

The fire at the Chevron refinery in Richmond, about 10 miles northeast of San Francisco, broke out Monday evening.

It sent plumes of black smoke over the San Francisco Bay area and sent scores of people to hospitals with breathing problems before it was out the following morning.

Tom Kloza, chief oil analyst at Oil Price Information Service, says Chevron's refinery is big and important to the market.

With inventories of gasoline in the region already low compared with the rest of the country, Kloza says pump prices in California and elsewhere on the West Coast will soon average more than $4 per gallon. 

As traders recalled a similar fire on the same unit in 2007 that left the plant mostly idle for months, Los Angeles benchmark gasoline premiums spiked nearly 25 cents, driving up the price of the nation's costliest motor fuel and delivering a margin boost for competing refiners who may try to increase output. Wholesale gasoline was trading at about $3.25 a gallon.

Not all of the 245,000 barrel-per-day plant, which accounts for one-eighth of California's refining capacity, appears to have been shut down, despite local media reports suggesting the sprawling facility had been idled.

"We are still continuing to operate," spokesman Brent Tippen told Reuters, adding that he could not yet provide details on which specific parts were running.

With the crude distillation unit that apparently triggered the blaze believed to have shut earlier, it is unclear how long secondary units -- which rely on feed from the CDU to produce finished fuel like gasoline -- can keep running.

Trade sources who saw images of the 40-foot flames that burned for hours feared the closure could last up to three months, although other experts said it was too early to say.

"It's hard to judge the damage. There is a lot of volatile material there and so looks can be deceptive," said John Auers, a refinery specialist with Houston-based consultants Turner Mason. "If there is no major damage to the units, it could be a matter of days before it returns." 

Below, CNBC's Sharon Epperson reports on the potential impact the fire at Chevron's California refinery could have on gas prices.

Associated Press and Reuters contributed to this report.

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