California Gas Stations Shut as Oil Refiners Ration SuppliesLynn Doan and Joshua Falk
Gasoline station owners in the Los Angeles area including Costco Wholesale Corp. are beginning to shut pumps as the state’s oil refiners started rationing supplies and spot prices surged to a record.
Valero Energy Corp. stopped selling gasoline on the spot, or wholesale, market in Southern California and is allocating deliveries to customers. Exxon Mobil Corp. is also rationing fuel to U.S. West Coast terminal customers. Costco’s outlet in Simi Valley, 40 miles (64 kilometers) northwest of Los Angeles, ran out of regular gasoline yesterday 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 yesterday. “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.”
Spot gasoline in Los Angeles has surged $1 a gallon this week to a record $1.45 a gallon premium versus gasoline futures traded on the New York Mercantile Exchange, data compiled by Bloomberg show. That’s the highest level for the fuel since at least November 2007, when Bloomberg began publishing prices there. On an outright basis, the fuel has jumped to $4.3929 a gallon.
Gasoline at the pump gained 8.3 cents to $4.315 a gallon in California yesterday, according to AAA.com, 53.1 cents more than the national average of $3.784. In Los Angeles the price was $4.347. Gasoline futures for November delivery on the Nymex rose
14.34 cents to settle at $2.9429 a gallon, after falling yesterday to a 10-week low. Retail price movements tend to lag behind those of futures.
“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 by e-mail.
Exxon’s Torrance refinery is restoring operations after losing power Oct. 1. Phillips 66 is scheduled to perform work on gasoline-making units at its two California refineries this month, two people with knowledge of the schedules said. A Chevron Corp. pipeline that delivers crude to Northern California refineries was also shut last month due to elevated levels of chloride in the oil.
Spot California-blend gasoline, or Carbob, in San Francisco surged 30 cents to $1.40 a gallon over futures, also the highest level since at least 2007, at 4:03 p.m. New York time.
Low-P, a gasoline station in Calabasas, California, 30 miles west of Los Angeles, stopped selling unleaded gasoline Oct. 2 and ran out of high-octane and medium-octane fuel yesterday, John Ravi, the station’s owner, said by phone yesterday. Ravi said he posted an “Out of Gasoline” sign on each pump and took down the prices outside his shop.
“I can get gas, but it’s going to cost me $4.90 a gallon, and I can’t sell it here for $5,” Ravi said. “If you come here right now, I’ve got some diesel left. That’s all. My market is open, but no gas.”
“We’re going to start shutting pumps Friday,” Sam Krikorian, owner of Quality Auto Repair in North Hollywood, said by phone yesterday. “Gas is costing me almost $4.75 a gallon with taxes. There’s no sense in staying open. The profit margins are so low it’s not worth it.”
’Squeeze is On’
“The squeeze is on, and people are doing desperate things,” Bob van der Valk, an independent petroleum industry analyst in Terry, Montana, said by e-mail yesterday. “The mom-and-pop gas stations are having to close down from either not being able to obtain gasoline from their regular distributor or cannot afford the break-even price of almost $5 per gallon.”
Costco is working on a plan to alert its members as gasoline runs out at the company’s stores “so customers don’t have to guess where to go,” Cole said. The company will sell whatever premium gasoline it has stored for regular gasoline prices wherever supplies run out, he said.
“Costco is a membership warehouse club with a relationship based on trust,” he said. “We’re not delivering what the members asked us to deliver, and that’s not acceptable to us. So we’re doing whatever we can to fix it.”
Van der Valk called the price surge a “a short-term problem.” Wholesale costs should start falling as Exxon’s refinery returns to normal operations and other plants finish maintenance.
The California Independent Oil Marketers Association, a Sacramento-based group that represents wholesale and retail fuel marketers, asked the state yesterday 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 yesterday.
“Everybody is concerned about what might happen,” he said. “The real question is: How long is this going to last and what can the state do?”
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.
The independent gas station owners are typically the first to run out of fuel and shut their pumps when spot prices surge because they often lack long-term contracts to buy from fuel suppliers at set prices, McKeeman said.
Jim Li said yesterday that he may stop selling gasoline at his independent station, Best Auto Care, in San Francisco. He’s charging $4.59 a gallon for the fuel, “and I’m still losing money,” he said.
Wholesale prices are “going up so quick that there’s not even any margin to make any money at all,” he said by telephone.
California-grade, or CARB, diesel in Los Angeles climbed
0.5 cent to 16.5 cents a gallon above heating oil futures on the Nymex. The fuel in San Francisco was unchanged at a premium of 17 cents a gallon versus futures.
Jet fuel in Los Angeles increased 0.37 cent to a premium of
11.25 cents a gallon against futures, the highest since Sept.
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