California issues regulation waiver to address gasoline shortage

08 October 2012 17:40  [Source: ICIS news]

HOUSTON (ICIS)--California has waived a regulation that required refiners to continue producing higher cost summer blends, a move that should address the state's gasoline shortage, an analyst said on Monday.

By allowing an earlier transition into winter-blend gasoline, California's fuel supply could increase by 8-10%, which would help lower record high gasoline prices in the state, said Patrick DeHaan, analyst with GasBuddy.com.

California Governor Jerry Brown has ordered the California Air Resources Board (CARB) to immediately take emergency steps to increase the amount of gasoline available to retail stations to assist in bringing down prices.

The state will allow an early transition into winter-blend gasoline, which could increase supplies with “only negligible air quality impacts,” according to Patrick DeHaan, an analyst with GasBuddy.com.

The Reid Vapor Pressure (RVP) limits are in effect in southern California until 31 October. In other areas of the state, the regulations are lifted as early as 30 September. Most other parts of the country raise RVP levels in mid-September.

Gas prices in California have skyrocketed over the past week due to a tightening of fuel supplies caused by refinery shutdowns.

DeHaan said the restart of ExxonMobil’s Richmond refinery and Tesoro’s refineries have already begun to stabilise the market and reduce fuel prices.

The delayed timing on the waiver from the governor has raised some questions, as DeHaan said wholesale gasoline prices had already dropped by 45 cents/gal on 5 October, two days before Governor Brown even made the announcement.

But DeHaan said, “the most important thing is that California motorists will be getting relief at the pump.”

Phil Flynn, an analyst with Price Futures Group agreed, saying it was, “better late than never”.

GasBuddy.com has the current average gasoline price in the state of California at $4.661/gal, higher than the average on 5 October, which was at $4.535/gal. California is still listed as the state with the highest retail prices.

In comparison, the current national average of gasoline is at $3.799/gal.

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By: Anna Matherne
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