California Refiners Ration Gasoline as Prices Near Record
Exxon Mobil Corp. (XOM) and Valero Energy Corp. (VLO) are rationing gasoline deliveries to customers in California as refinery halts cut into the state’s supplies, driving pump prices toward record highs.
Valero stopped spot sales in Southern California and is allocating the rest of its deliveries to customers. Exxon is also rationing to buyers at West Coast terminals. Retail prices in the state jumped to an average $4.486 a gallon, according to data published today by AAA, the nation’s biggest motoring organization.
California’s gasoline markets are particularly susceptible to refinery outages because the state is mostly cut off from oil-products pipelines spanning the rest of the country, according to the U.S. Energy Information Administration. The latest shortage forced retailers in the Los Angeles area, including Costco Wholesale (COST) Corp., to run out of supplies, shut pumps and, in some cases, charge their highest prices ever.
“We’re really sort of shell-shocked,” said Tom Robinson, president of Santa Clara, California-based Robinson Oil Corp., which operates 34 Rotten Robbie convenience stores. “If you’ve been in California long enough, you know how volatile our market can be. But to see prices go up $1 a gallon since Monday -- I’ve never seen that before.”
Spot gasoline in California, with its own blending requirements to reduce smog and difficulty importing supplies from other states, surged to record highs this week. California- blend, or Carbob, in Los Angeles jumped 30 cents to $1.45 a gallon over New York Mercantile Exchange futures yesterday, the highest level since at least November 2007, when Bloomberg began publishing the prices.
The fuel’s premium tumbled 65 cents to 80 cents a gallon over futures at 1:47 p.m. New York time today after Phillips 66 (PSX) was said to delay work on a hydrocracker at the Los Angeles refinery and Exxon said its Torrance refinery had resumed normal operations after losing power Oct. 1.
“The Rockies, the Midwest, Gulf Coast, East Coast are all very connected by pipelines,” said Tim Hess, a petroleum analyst for the Energy Information Administration in Washington, D.C. “The West Coast is not connected to that system at all. It’s quite a bit dependent on its own refinery production.”
Refiners outside California are generally not equipped to supply the cleaner-burning gasoline required in the state, Hess said by telephone.
“That adds another level of complexity when there’s an outage and they have to import gasoline,” he said. “They still need to figure out how to blend that.”
Pump prices in California Oct. 3 were 53.1 cents more than the national average of $3.784, AAA data show. In Los Angeles, the price was $4.347. The record high for California is $4.61 a gallon, and in Los Angeles $4.626.
Robinson said yesterday by phone that his stations were charging $4.599 a gallon for unleaded gasoline, the highest price the company’s ever posted. His stations are among many receiving allocated deliveries from suppliers, he said.
“There’s no doubt” the company’s prices will climb higher, he said.
Low-P, a gasoline station in Calabasas, California, 30 miles west of Los Angeles, shut pumps Oct. 2 after running out of gasoline.
The station received a fuel delivery yesterday that will allow it to reopen, while charging almost $6 a gallon, John Ravi, the station’s owner, said yesterday by phone. The shipment should keep the store open for another week, Ravi said.
Costco’s outlet in Simi Valley, 40 miles (64 kilometers) northwest of Los Angeles, ran out of regular gasoline Oct. 3 and was selling premium fuel at the price of regular.
The gasoline shortage “feels like a hurricane to me, but it’s the West Coast,” Jeff Cole, Costco’s vice president of gasoline, said by telephone Oct. 3. “We’re obviously extremely disheartened that we are unable to do this, and we’re pulling fuel from all corners of California to fix this.”
The power failure at Exxon’s Torrance refinery shut some production units and slowed output from others earlier this week. Phillips 66 is performing work at its Rodeo refinery in Northern California, and Chevron Corp. (CVX)’s Richmond refinery has been running at reduced capacity since a fire Aug. 6. Chevron also shut a pipeline that delivers crude to Northern California refineries last month because of elevated levels of chloride in the oil.
“Product supply in California has tightened, especially in Southern California, due to refinery outages,” Bill Day, a Valero spokesman at the company’s headquarters in San Antonio, said yesterday by e-mail.
The California Independent Oil Marketers Association, a Sacramento-based group that represents wholesale and retail fuel marketers, asked the state Oct. 3 to expedite a waiver that would allow refiners to produce and sell winter-grade fuel, Jay McKeeman, a spokesman for the association, said by telephone that day.
California’s summer-blend fuel requirements are in effect in Southern California until Oct. 31. The Reid Vapor Pressure, or RVP, limits are lifted in other areas of the state as early as Sept. 30.
The state Air Resources Board and Energy Commission are evaluating fuel supplies and haven’t decided on the waiver, Dave Clegern, a spokesman for the air board in Sacramento, said by e- mail today.
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