US West Coast leads recent gasoline price declines
According to the US Energy Information Administration (EIA), the US national average price for gasoline has decreased in respect to its summer to date peak of US$ 3.68/gal, reached on 22nd July. It now stands at US$ 3.55/gal as of 26th August, despite an increase in crude oil prices early in July.
The decrease has been led by declining retail gasoline prices on the West Coast. On 26th August, the West Coast (PADD 5) average retail price for regular grade gasoline was US$ 3.75/gal, 21 cents/gal lower than the US$ 3.95/gal average on 22nd July. The decline in retail prices on the West Coast results largely from a well supplied California gasoline market.
California is the largest gasoline market on the West Coast, accounting for almost two thirds of gasoline sales in the region in 2012, and price trends in California tend to drive trends in the region as a whole.
The average price for regular gasoline in California fell by 23 cents/gal since 22nd July to US$ 3.80/gal on 26th August.
Data from the California Energy Commission indicates that in 7 of the past 10 weeks, California refiners’ production of gasoline that meets the California Air Resources Board’s specification (CARBOB) has been near or above the top of the five year range for the given week.
In contrast, EIA data shows that gross refinery inputs for PADD 5 have been below the five year average in recent weeks. This can be partly attributed to the closure of Tesoro’s 94 000 bpd Kapolei refinery in Hawaii earlier this year, and lower throughputs in other PADD 5 refineries outside of California.
As of 23rd August, gasoline inventories on the West Coast were equal to 28.4 million bbls, 0.9 million bbls (3%) above the five year average level for that week, and near the top of the five year range. The current inventory level is also 2.5 million bbls higher than inventories in late April, a significant counter seasonal increase.
Typically, West Coast inventories fall by approximately 3.0 million bbls from late April to late August. High inventory levels can buffer the price effects of refinery outages, especially in the relatively isolated California market, where resupply from outside regions can take more than a week to arrive and can be costly.
Gasoline inventory on the West Coast is currently much higher than in 2012, when the region experienced a series of unanticipated refinery outages that resulted in several retail gasoline price spikes. Last year, significant refinery outages early in the year resulted in tight gasoline supplies in the spring and persistently low inventory levels that did not recover until the middle of autumn.
Changes in gasoline prices have not followed crude prices, as is usual. As of 22nd August, spot prices for CARBOB in Los Angeles and San Francisco were both trading at 26 cents/gal discounts to reformulated blendstock for oxygenate blending (RBOB) in New York Harbor.
In June, before the recent drop in prices, CARBON spot prices in Los Angeles and San Francisco traded at monthly average premiums to New York RBOB of 22 and 16 cents/gal, respectively.
Given the lagged relationship between wholesale prices and retail prices, current wholesale price levels indicate that without further changes to the market there could be additionally decreases in West Coast gasoline prices.
The retail gasoline price in California remains 25 cents/gal above the US average, despite having declined more than the US national average price. Higher than average state excise taxes on gasoline and a higher cost to produce CARBOB, which has a lower Reid vapour pressure requirement than other US gasoline blendstocks, cause California retail prices to be among the highest in the country.
As of the beginning of 2013, state and federal taxes accounted for approximately 38 cents of the price of each gallon of gasoline sold in California, the most of any state in the country. In addition to these taxes, California levels 2.25% sales tax on each gallon of gasoline sold, and some local California jurisdictions also impose taxes.
For more from the EIA's This Week in Petroleum, released on 28th August 2013, see also 'US gasoline price up less than a penny'.
Adapted from a press release by Emma McAleavey.
Read the article online at: https://www.hydrocarbonengineering.com/gas-processing/29082013/west_coast_leads_recent_gasoline_price_declines601/
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