Tesoro Corp. yesterday announced plans to upgrade its Kapolei refinery along with three other locations to process lower cost, high-sulfur crude oil.

The equipment, which removes sulfur from oil, has been ordered; however, no installation dates were announced.

The upgrades will allow Tesoro's Kapolei plant to refine higher-sulfur crude oils, which are cheaper and more readily available than low-sulfur crude, said Lance Tanaka, Tesoro's government relations manager.

"This just gives us the ability to run a wider slate (of crude) so we can continue to reliably deliver the kinds of fuels our customers need," he said.

Hawai'i drivers typically pay the highest gasoline prices in the nation. Those prices are partially caused by the state's isolated, small market, which isn't subject to the same fluctuations in supply and demand that force Mainland prices to move. Hawai'i's reliance on low-sulfur crude oil has been cited as a contributing factor in Hawai'i's high gasoline prices.

David Hackett, president of Stillwater Associates of Irvine, Calif., an oil industry consultant, said Tesoro's upgrades will likely lead to lower raw material costs for Tesoro. That ultimately could benefit the company's investors and consumers.

"Generally what happens with these kinds of things is the shareholders get to keep some of the benefit and some of it probably gets passed along to consumers," Hackett said.

Regulations reducing the sulfur content of gasoline and diesel fuel and the mandated use of ethanol have forced refiners to install equipment that makes plants less efficient than in the past, according to oil companies.

"All these changes all tend to increase the cost of producing what we produce," said Chevron Corp. spokesman Al Chee.

Chee said he couldn't comment on any specific future upgrades planned for Chevron's refinery, which also is in Kapolei.