Failures at oil refineries raise gas prices - A third of USA refineries reported fires, power failures, leaks, spills and other disruptions this year

By Jad Mouawad - THE NEW YORK TIMES - Sunday, July 22, 2007

Oil refineries across America have had a record number of fires, power failures, leaks, spills and breakdowns this year, causing dozens to shut down temporarily or trim production. The disruptions are helping drive gasoline prices to highs not seen since last summer's records.

These mechanical breakdowns, which one analyst likened to an "invisible hurricane," have created a bottleneck in domestic energy supplies, helping push up gasoline prices 50 cents this year to well above $3 a gallon. A third of the country's 150 refineries have reported disruptions to their operations since the beginning of the year, a record, according to analysts.

There have been blazes at refineries in Texas, Louisiana, Indiana and California, some of them caused by lightning strikes. Plants have suffered power losses that disrupted operations; a midsize refinery in Kansas was flooded by torrential rains last month.

American refiners are running roughly 5 percent below their 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 of their plants to make up for lost supplies and take advantage of the high prices. But, analysts say, they are now 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 still 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 disruptions in oil supplies from places such as Nigeria and Norway. But analysts say the refining bottleneck in North America 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 has also 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 on Friday.

Some critics have theorized on Internet blogs that the squeeze on gasoline and other refined products points to a deliberate effort by oil companies to bolster profits by keeping supplies tight. But experts point out that the companies have little incentive right now 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. "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, which they were not originally designed to do.

This year's problems have raised alarms about the safety of refining operations, especially after an accident at a BP refinery in Texas two years ago that killed 15 workers. The A third of the country's refineries have reported fires, power failures, leaks, spills and other disruptions this year the Federal Chemical Safety Board issued a critical report blaming a broken safety culture at BP. But the board's chairwoman, Carolyn Merritt, said there was a pattern in many other refinery incidents that the board had investigated.

"There is a lack of investments in modern equipment," Merritt said. "The overwhelming preponderance is that if you have inadequate engineering and equipment, poor process safety management and poor staffing, you're set up for a catastrophe."

Merritt, who was appointed by President Bush and will retire after her five-year term ends in August, also singled out the Occupational Safety and Health Administration, which she said does not conduct enough inspections. "There is no enforcement," she said.

OSHA defended its record and said it inspected almost 500 refineries from 1994 to 2004. The agency said it would inspect all refineries under its jurisdiction in the next two years.

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."
Read more in the Austin American Statesman

China closes chemical plant and factories which produced tainted pet food, cough syrup and toothpaste

Damage control
ASSOCIATED PRESS - July 21, 2007
BEIJING -- China moved to sharpen its product safety image yesterday, shutting down a chemical plant linked to dozens of deaths in Panama from tainted medicine and closing two companies tied to pet deaths in North America.

The measures come as Beijing fights to reassure global customers that it takes food and drug safety seriously amid concerns over chemicals and toxins that have been found in its products.

The closures come months after links between the companies' products and the deaths became known but only days ahead of high-level visits by U.S. and European officials.

EU Consumer Commissioner Meglena Kuneva arrives next week and has said she will press China to be much more vigilant about product safety. On July 31, a five-day meeting between officials of the U.S. Food and Drug Administration and China's food safety agency begins in Beijing. Chinese officials have said the sides will discuss setting up a collaborative food safety mechanism.

Two of the companies that had their licenses revoked and offices shut by China's product safety watchdog were the Xuzhou Anying Biologic Technology Development Co. Ltd. and Binzhou Futian Biology Technology Co. Ltd.

Products from both were implicated in the deaths of dozens of pets in North America. Reports of the deaths and links to China emerged in March.

The third company closed was the Taixing Glycerin Factory, which has been accused of selling what it called industrial "TD glycerin," a mix of 15 percent diethylene glycol and other substances. The diethylene glycol, a thickening agent found in antifreeze, was passed off as harmless glycerin, a more expensive sweetener commonly used in drugs.

It eventually ended up in Panamanian cough syrup and other medicines that killed at least 94 persons. The deaths were first reported last October, with the link to China emerging in early May.

Chinese quality officials have said "TD glycerin" is a misleading label because it could be mistaken for glycerin. But they also said the bulk of the blame lies with Panamanian merchants they accused of fraudulently mislabeling the "TD glycerin" as medical glycerin.

Gabriel Pascual, leader of a group of families who lost loved ones after they were poisoned by the tainted cough syrup and other medicines, applauded the closure of the Chinese chemical company. But, he added: "We will continue demanding justice in Panama."

While the government has announced the detention of an unspecified number of managers from Xuzhou Anying and Binzhou Futian, yesterday's action was the most definitive yet against the manufacturers linked to melamine-tainted wheat gluten blamed for the pet deaths.

The General Administration for Quality Supervision, Inspection and Quarantine also said police were investigating the two companies, but did not elaborate.

Following the pet-food deaths, U.S. authorities have turned away or recalled toxic fish, juice containing unsafe color additives and popular toy trains decorated with lead paint. Chinese-made toothpaste containing diethylene glycol has also been rejected or recalled in North and South America, Asia and Europe.

Xuzhou Anying, located in Jiangsu province, "unlawfully added melamine in some of its products which could not meet the protein content requirement set in the contracts," the quality administration said. "This behavior of adulteration severely violated the feed quality and safety standards."

Binzhou Futian, headquartered in neighboring Shandong province, "added melamine in some of its products which could not meet the protein content requirement ... constituting severe adulteration," the statement said.

Melamine, used in plastics, fertilizers and flame retardants, has no nutritional value but is high in nitrogen, making products to which it is added appear to be higher in protein — a way to cut costs for the manufacturer.

Bates Gill, a China specialist at the Washington-based Center for Strategic and International Studies, said yesterday's actions struck him as "too little, too late."

"This problem of poor quality and lack of oversight has been around for a decade or more," he said. "What's different this time is how the shoddiness of their factories has become apparent to the world."

Read more/ see photos in The Washington Times