Refinery outages lead to retail gasoline shortages in California

05 October 2012 16:45  [Source: ICIS news]

HOUSTON (ICIS)--Refinery outages and the resulting supply shortage along the US west coast have driven gasoline prices higher, causing retail stations to close, and recent high oil prices could prolong the shortage, an analyst said on Friday.

“The west coast gas market is in chaos, driving prices to record highs and causing shortages of gasoline and the closing of gas stations. Refinery fires and maintenance have conspired to reduce supplies,” said Phil Flynn, analyst with Price Futures Group.

California has been hit with refinery fires and maintenance in the past few months.

Chevron’s 245,000 bbl/day Richmond refinery had a fire in August and ExxonMobil’s 149,500 bbl/day Torrance refinery performed maintenance at the start of October. Furthermore, Phillips 66 said planned maintenance is underway at both its Los Angeles and Rodeo refineries.

Other refiners, such as Valero, are meeting the needs of its own branded stations. However, there are not enough supplies for the independents.

“This has caused some to pay up or just shut down as they either refuse to pay the price or just can’t secure supply. With Valero not selling it may be impossible for some to secure supply,” Flynn said.

According to GasBuddy.com analyst, Patrick DeHaan, the cost of replenishing underground tanks has risen by $1/gal in the past week.

“Some station owners, knowing they can’t raise prices fast enough, are choosing to sit on the sidelines until the madness is over,” DeHaan said. “They’re buying wholesale gas for over $4.75/gal after taxes are added, but in some cases, only selling it for $4.25/gal, a massive loss of money. So what to do instead? Close down, wait out the storm, and hope it doesn’t last a long time.”

Another factor pushing retail prices higher is the summer-blend fuel requirements that are in effect in southern California until 31 October.

The Reid Vapor Pressure (RVP) limits, or emission regulations during the high ozone summer season, are lifted in other areas of the state as early as 30 September. In other parts of the country, the summer RVP levels are raised mid-September.

The summer gasoline RVP blends are more expensive than winter blends, and there is a particular tightness of California’s summer blend of gasoline, Flynn said.

GasBuddy.com has the current average gasoline price in the state of California at $4.535/gal and rising, making it the state with the highest retail prices. In comparison, the current national average of gasoline is at $3.788/gal.

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By: Anna Matherne
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