Pipeline Dispute contributes to high Gas Prices

For every story about Barbara Boxer investigating Gas Prices Soaring!, there is a behind-the-scenes look at why gas prices in California always appear out-of-whack with the rest of the nation. Today's Los Angeles Times explores one small issue that affects all Southern Californians:

Kinder Morgan is best known as one of the nation's largest "common carrier" pipeline operators, a business that involves collecting fees in return for carrying gasoline, diesel and jet fuel from refineries and ports to the fueling terminals where tanker trucks load up. It owns all the major fuel pipelines in California and is required to serve all customers equally, charging rates set by the federal government...

San Francisco-based Chemoil, a $3.5-billion, worldwide supplier of heavy marine fuel oils, created a subsidiary in 2004 to crack the gasoline market.

To make way for the fuel business in Southern California, Chemoil upgraded at least one port-side storage tank in Long Beach to hold fuels like gasoline instead of heavy fuel oils. The company also built a pipeline to carry the imports to Carson, where the company converted enough storage capacity to hold more than 500,000 barrels of gasoline, diesel, jet fuel or their key ingredients, Chemoil manager Barry Hamberg said at the state oil-market hearing.

Then Chemoil sought a direct connection to Kinder Morgan's system, assuming it would be granted without much fuss, because most of the region's refiners have just such a connection from their own tank farms to the pipeline at issue.

It didn't turn out that way. Kinder Morgan is awaiting approval to build 19 massive new fuel storage tanks at its Carson facility — which would compete with Chemoil's Carson storage facility for customers.

And in the end, as always, the customers end up paying.