Why the gas pump drained our wallets this year

Oil refineries across America have been plagued by a record number of fires, power failures, leaks, spills and breakdowns this year, causing dozens to shut down temporarily or trim production.

The disruptions, which one analyst likened to an "invisible hurricane," are helping to drive gasoline prices in much of the country to highs not seen since last summer's records.

While prices in the Seattle-Bellevue-Everett metropolitan area have bucked the national trend recently, falling to slightly less than the U.S. average, these mechanical breakdowns have created a bottleneck in domestic energy supplies, helping to push up gasoline prices 50 cents this year both in Washington state and the country as a whole.

One-third of the country's 150 refineries have reported disruptions to their operations this year, a record, according to analysts. There have been blazes at refineries in Louisiana, Texas, Indiana and California, some caused by lightning strikes. Plants have suffered power losses that disrupted operations; a midsize refinery in Kansas was flooded by torrential rains last month.

U.S. refiners are running roughly 5 percent below normal levels at this time of the year.

"You have a system that is taxed to the limit," said Adam Robinson, an energy research analyst at Lehman Brothers. "This is what happens when spare capacity is eroded."

After Hurricanes Katrina and Rita disrupted the nation's energy lifeline almost two years ago, oil companies delayed maintenance on many plants to make up for lost supplies and take advantage of high prices. Analysts say they now are paying a price for deferring repairs.

As a whole, refining disruptions have been considerably higher than in previous years: They averaged 1.5 million barrels a day in the first quarter, compared with 700,000 to 900,000 barrels a day from 2001 to 2005. In the days after the hurricanes, refiners were forced to briefly halt as many as 5 million barrels of production.

In 2006, when refiners were reeling from the impact of the hurricanes, disruptions in the first quarter averaged 1.35 million barrels a day.

Many factors have led to the rise in gas prices, including oil-supply disruptions from such places as Nigeria and Norway. But analysts say North America's refining bottleneck has been one of the main drivers of higher energy prices this year.

The refining crunch has pushed wholesale gasoline prices up 35 percent this year. It also has contributed to a 23 percent gain for crude-oil prices in the same period. Oil futures in New York closed at $75.57 a barrel Friday.

Some critics of the industry have theorized on Internet blogs that the squeeze on gasoline and other refined products points to a deliberate effort among oil companies to bolster profits by keeping supplies tight. But experts note that the companies have little incentive to hold back on fuel supplies.

"Every refinery would like to run as much crude as possible, but they simply can't," said David Greely, senior energy economist at Goldman Sachs, who in a recent report compared the drop in domestic refining to an "invisible hurricane." "These are more complex systems. There are more chances for things to go wrong. And when things go wrong, they tend to back up the system."

Meanwhile, refiners have been scrambling to meet a raft of environmental regulations, phase out toxic additives, add ethanol to the fuel mix and introduce new ultra-low sulfur standards for gasoline and diesel. Industry insiders attribute much of the fragility of refining operations to the difficulty of making these cleaner fuels.

Refiners spent $9 billion from 2002 to 2006 to make low-sulfur diesel. But producing these cleaner fuels means processing crude oil more intensely through the refining process, at higher pressures and temperatures. This leads to more chances for glitches or breakdowns, refiners say.

"It's a marvel we can continue to run refineries the way we do these days, given the many requirements and specification changes we have," said Charles Drevna, executive vice president of the refining industry's main trade group, the National Petrochemical and Refiners Association. "There comes a time when the piper has got to be paid."

Meanwhile, demand has been rising relentlessly, providing little respite to the nation's aging energy infrastructure. Even as consumers complain loudly about high prices, they show no signs of scaling back. Gasoline consumption reached 9.66 million barrels a day in the first week of July, the second-highest level on record.

"The cushion that used to be available five to seven years ago for these unplanned perturbations is no longer there," said Jeet Bindra, Chevron's president of global refining. "When a refinery has a hiccup, there are consequences on supplies."

Part of the problem, analysts and refiners said, stems from the hurricanes two years ago. Many refineries in Louisiana and Mississippi were flooded, and about one-quarter of the nation's refining capacity was shut for weeks.

"Since refining has become such a wonderful business, refiners have delayed maintenance," Robinson said. "But when they do go down, they stay down for longer, and they discover all sorts of problems."

In late March, for example, a fire at a large compressor at a BP refinery in Whiting, Ind., caused a hydrogen-treating unit that removes sulfur from some oil products to shut. That meant BP had to turn off a crude-oil unit for early maintenance. A power disruption two weeks later damaged another distillation tower. And a third crude-oil tower was shut briefly in July so operators could fix a small leak. Since the first incident, the 405,000 barrels-a-day refinery has been running at about half its capacity.

Not all refining disruptions are the result of similar incidents. Refineries typically schedule yearly maintenance that sometimes requires them to shut production entirely. But even these long-scheduled shutdowns now can take longer to complete.

No refineries have been built in the United States in more than three decades, because refiners say they are too costly. Instead, they have been expanding existing refineries.

All this is happening as the industry goes through another golden age. After 20 years in the doldrums, the refining business never has been so good for oil companies. Refining margins — the difference between the price of crude oil and the value of refined gasoline made from it — have shot up as much as $25 a barrel for some types of crude oil, compared with about $5 a barrel a few years ago.

But with a third summer of high gasoline prices, lawmakers are debating legislation they say would punish oil companies for exploiting the tight supply situation and engaging in "price gouging." At the same time, they are pressing refiners to produce more fuel.

"Refiners want to keep running in today's economic environment," Drevna said. "But when they shut down they are accused of gouging the system. When they don't, they are criticized for overrunning their facilities."

Seattle Times staff contributed to this report.