Bob Tippee
In the news storm surrounding a refinery accident that kills 15 people and injures more than 100, market responses are incidental.
The Mar. 23 explosion at BP PLC's 446,500-b/cd refinery at Texas City, Tex., was a tragedy with overwhelming human consequences. Those effects are vastly more important than a panic-driven swing in the price of gasoline. And unlike the price swing, they won't soon go away.
The price did swing, nevertheless. At this writing, the day after the disaster, markets remained nervous, and questions lingered about gasoline supply.
The questions were partly justified and partly not.
They were justified to the extent that the tragedy reminded a market vulnerable to upset that things can go catastrophically wrong in refineries.
But questions about gasoline supply were answered the day of the accident when BP identified the damaged equipment as an isomerization unit and confirmed that the rest of the refinery remained in operation.
For market observers familiar with refining, those two data put the supply effects in important perspective. Unfortunately, there are more market observers than there are market observers familiar with refining.
To gasoline supply, loss of an isomerization unit isn't as consequential as would be the loss of a core unit such as a fluid catalytic cracker or crude still.
Isomerization makes straight molecules crooked to change their chemical characteristics in some desirable way. BP said it was using the destroyed isomerization unit to raise octane. That usually means turning pentane and hexane, extracted from gasoline produced by distillation towers, into higher-octane isopentane and isohexane for reblending with gasoline streams.
At its complex Texas City refinery, BP can divert pentane and hexane previously destined for isomerization to other streams and choose from a variety of options to adjust to the octane deficit.
As long as the refinery remains on stream, any loss of gasoline supply will be small.
That, of course, answers the market's most pressing question—the easiest question of the day.
The tough questions are those awaiting BP, the refining industry, and families of the victims. Some of those questions never will have answers.
(Online Mar. 24, 2005; author's e-mail: [email protected])