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Tuesday, August 8, 2006 - Page updated at 12:00 AM

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Coming soon: gas-price jump

Seattle Times staff reporters

Washington drivers will likely feel the brunt of BP's closure of its Prudhoe Bay oil field in Alaska, although gasoline-price increases are not expected to hit hard until later this week.

Washington's five refineries get more than half of their crude oil from Alaska's North Slope, which includes the Prudhoe field.

"We're the closest large market for Alaska oil," said Sam Van Vactor, president of Economic Insight, an energy consulting firm in Portland.

BP announced it would shut down the field — the single biggest source of domestic crude — to replace 16 miles of severely corroded pipeline. That may take months.

The West Coast has no pipelines to oil supplies in the Eastern United States, leaving it cut off from immediate relief even if the government releases oil from its emergency stockpile on the Gulf Coast.

As a result, gas prices in Washington and Oregon could race higher than the rest of the country, although no one can predict how high. Some analysts have hinted that gasoline could reach $4 a gallon in the Pacific Northwest and California, while others have suggested that the market could adjust relatively quickly, causing only a slight increase at the pumps of a dime or so per gallon.

Though California drivers also will feel the pain, that state gets only about 20 percent of its crude oil from Alaska.

Janet Ray, a spokeswoman for AAA of Washington, said the Northwest's reliance on Alaskan oil helped at the pump following the dramatic supply decreases caused by Hurricane Katrina. But that could end up hurting Washington motorists now, she said.

"What we're going to be watching for is the potential for prices to increase beyond record prices we've seen in the past year," Ray said. "Our expectation is there may be more upward movement in the next few days."

The association's Daily Fuel Gauge Report for the state showed little or no upward movement in prices throughout Washington state's metro areas early Monday. Drivers in Vancouver, Wash., were getting the best deal in the state, with the average price for a gallon of regular unleaded hovering about $2.98. Seattle drivers were paying nearly $3.05 a gallon.

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On the New York Mercantile Exchange, light, sweet crude for September delivery climbed 3 percent, settling to $76.98 a barrel Monday, after peaking at $77.30 earlier in the day. It was the highest settlement price since July 14, when crude settled at a record $77.03 a barrel.

Washington's five refineries normally produce enough gasoline to supply Washington and Oregon, with some left over for California. To produce that gas, the refineries rely on Alaska, but also buy crude oil from Canada, Saudi Arabia, Iraq, Ecuador and other countries, according to Economic Insight.

The refineries have crude oil in storage that will last for the short term. After a couple of weeks, though, they will need more crude from other parts of the world to keep up gas production.

"That's what our folks are concentrating on now: what kind of flow, if any, is going to come back soon, and if not, then we need to start chartering vessels and getting product in here," said Michael Abendhoff, BP's Northwest director of public affairs.

About half the crude oil for BP's refinery near Blaine comes from Prudhoe Bay. Washington's other refineries are owned by Royal Dutch Shell, ConocoPhillips, a Texas-based company called Tesoro and the smaller U.S. Oil & Refining Co. in Tacoma. Together, they employ about 1,800 people plus hundreds of contractors.

None of the refineries is planning layoffs as a result of the shutdown.

Analysts were hesitant to guess how high the price of gas might go in Washington because of the oil-field closure.

Gas prices often decline in late summer in anticipation of demand tailing off, one factor among many that determines gas prices.

"There will be some price increase because of the reduction in supply, but there are also a thousand things going on that can push the price down," said Mark Anderson, senior policy specialist in the energy policy division for the Washington Department of Community, Trade and Economic Development.

The Associated Press and the Los Angeles Times contributed to this report.

Melissa Allison: 206-464-3312 or mallison@seattletimes.com

Copyright © 2006 The Seattle Times Company

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