As the city’s R Avenue paving project wraps up this week, Anacortes may be looking at delays when it comes to similar projects in its future.

The Tesoro Refinery on March Point stopped producing asphalt grade oil in July, sparking a shortage in Northwest Washington.

Few paving contractors can get the material to do already scheduled projects, including at least four Washington State Department of Transportation projects that are on hold, said Anacortes Public Works Director Fred Buckenmeyer.

Lakeside Industry, however, is able to follow through on its $340,000 contract to complete the R Avenue project. One reason is the company purchases its liquid asphalt from several suppliers, said Rod Gilmore, manager of Lakeside’s Anacortes division. Even so, Lakeside’s divisions throughout Western Washington went from having four suppliers of liquid asphalt earlier this year to only one — U.S. Oil & Refining Co. in Tacoma.

Any hiccup in the industry, whether it’s a refinery fire, a war or a hurricane, can affect the supply of liquid asphalt, Gilmore said. The situation is more critical than gasoline because no matter what, there is always gasoline but that’s not the case with asphalt.

Tom Gaetz, executive director with the Washington Asphalt Pavement Association, said it’s a very fluid market in which refiners buy oil and trade their products. It affects what crude oil they purchase, which can vary dramatically.

Sweeter crudes produce more lighter end products while sour crudes produce more residual products such as asphalt. Some refiners also put in cokers that further enhance the refining process so they can maximize the lighter end products from the crude and extract less residual, Gaetz said.

Tesoro switched the type of crude oil it purchases to get a higher yield of higher value products such as diesel, gasoline and jet fuel, said Tesoro spokesperson Sarah Simpson.

“We’re an independent refinery, so we have to go out and buy crude oil for $125, $130 a barrel, whatever the market price is and then we refine that oil,” Simpson said. “Our profit is based on the margin on our products.”

Earlier this year the word was out that Lakeside’s suppliers Paramount Petroleum and Albina Asphalt Product wouldn’t have asphalt for the rest of the year, Gilmore said. And when Tesoro stopped producing it, it put everything into a tailspin.

Though Tesoro said it gave its customers ample notice that it would no longer be producing liquid asphalt, Gilmore said he received an e-mail in mid-July at 8 in the morning stating the refinery would not be producing the material as of 6 p.m. that same day.

Simpson said Tesoro told its customers at the beginning of the year it was not going to be a regular supplier of asphalt.

“And then several weeks ago we notified them and said we’re not going to be producing any more asphalt,” she said.

“The pressures on having enough (asphalt) can vary dramatically depending on what region or location you’re in,” Gaetz said. “Your area was a little more affected by liquid asphalt supply this year.”

The shift has been to try to get the material from other refiners to try to fill the gap, but it’s difficult for a company to change their production rates at a moment’s notice, Gaetz said.

In the meantime, Anacortes is set with projects it’s planned for 2008, Buckenmeyer said. But 2009 projects, such as paving Pennsylvania Avenue and repaving D Avenue, are questionable.

The city will just have to wait and see, Buckenmeyer said.

Gilmore said Lakeside Industry will also be OK with its projects for the rest of the year. And there’s a possibility when paving stops for the winter, supplies may be able to build up again, but everything is questionable.

“I don’t think anybody knows,” he said.

Until then some contractors are having to do jobs costing them more than what they bid them for. Prices can change four times from when a contract is signed to when the paving is done, Gilmore explained. Some entities such as the state allow escalation clauses in their contracts, but others don’t.

The asphalt shortage is not only affecting larger city and state jobs, but individuals who were planning to repave their driveways or businesses wanting to repave their parking lots, Gilmore said. They’re choosing not to because of the high prices the shortage has caused.

“It’s just a little bumpy at the moment for some agencies and some contractors, but we’ll find the answers and we’ll make the necessary adjustments,” Gaetz said. “We’ll just have to see how all the adjustments work their way through in making and meeting the demand for our product — asphalt.”