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Gas price spikes in Southern California

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Hydrocarbon Engineering,

Gasoline price spikes cost Californians an extra US$2.4 billion for their gasoline between February and April based on the average pump price paid by the average American. Southern Californians are currently paying US$4.00/gal. for regular gas, US$1.30 more than the national average. This is the widest gap ever recorded by the federal government's Energy Information Agency.

Prices at the pump have risen by US$0.69 in one month due to gasoline shortages and refinery outages. Oil refiners saw sky high profits in the first quarter of 2015 when the refinery outages began. Valero, one of California's largest refiners, reported California refining profits of US$82 million, over triple its average quarterly profits over the last five years. Tesoro, which dealt with a steelworkers strike and had to idle one of its refineries still had healthy profits of over US$100 million in California.

"California's oil refiners are the only industry in America that make a fortune when their factories go down," said Jamie Court, President of Consumer Watchdog. "Oil company CEOs are boasting to investors on conference calls about huge West Coast profits from their refinery outages while refusing to appear before state legislators. Why would oil refiners ever fix their refinery problems if it is making them a fortune? It is time for legislative reform."

Prices are set to rise still more as Phillips 66 started maintenance on its Los Angeles refinery. Industry analysts reported that maintenance on the refinery's hydrocracker was moved up from three weeks in June because of a breakdown at a nearby hydrogen plant that supplies the gasoline component to refineries.

The California Senate last week asked new questions of the CEOs of the state's top oil refiners who refused to appear at a state hearing in March. A letter from State Senators Jim Beall & Ben Hueso to oil company CEOs noted that outages often lead to price spikes, and asked, "Has your company taken any specific steps to reduce the potential for production delays – outages or slowdowns – at California refineries?"

The letter from Senators Hueso and Beall, was sent to the CEOs of Exxon, Chevron, Tesoro, Shell, Valero, Alon USA, and Phillips 66 with a request to prepare written responses to their questions about why retail price spikes frequently coincide with low reserves of refined product and refinery outages and what companies can do to blunt them. The letter asks CEOs to prepare answers to questions, including:

  • How many days of supply each refinery maintains.
  • How California gasoline reserves compare nationally.
  • How oil companies schedule refinery maintenance.
  • Why retail gasoline prices rise when competing refineries are out.

Adapted from press release by Rosalie Starling

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