On 7 October 2019, the average California regular retail gasoline price surpassed US$4/gal. for only the second time since 2014, according to the US Energy Information Administration’s (EIA) Gasoline and Diesel Fuel Update. The last time prices reached this level was in May 2019, which was a result of planned and unplanned refinery outages in California. California’s petroleum markets are isolated from the rest of the US because of California's lack of petroleum infrastructure connections to the rest of the country, so unplanned refinery outages in the state can have larger price impacts than in other areas of the country. In addition, California requires a different gasoline specification than the rest of the country, further narrowing supply options. The spike in crude oil prices following the 14 September attacks in Saudi Arabia on crude oil infrastructure led to a small, short-lived gasoline price increase across the US, followed by several unplanned refinery outages in California. The refinery outages further raised gasoline prices in the state even though average US gasoline prices declined.
On 14 October 2019, the price for retail gasoline in California averaged US$1.46/gal. more than the US average retail gasoline price (the price premium), the largest price difference since at least May 2000, when EIA began collecting California gasoline price data. On 30 September 2019, California gasoline price premiums reached US$1.31/gal., surpassing those seen during the Torrance refinery outage in 2015 (US$1.10/gal.) and the refinery outages that occurred earlier in 2019 (US$1.11/gal.) The recent price spike appears to be short-lived, similar to the price spike in May, and the price premium for gasoline in California declined to US$1.35/gal. on 28 October as refiners resumed normal operations and gasoline supply increased.
Shortly after the crude oil price spike following the attacks in Saudi Arabia, several refineries in California went down for both planned and unplanned maintenance. As a result, West Coast refinery utilisation fell from 95% to 78% between 6 September and 27 September, which happened at the same time that gross inputs into West Coast refineries decreased from 2.7 million bpd to 2.2 million bpd, the largest decline during a three-week period since at least 1995. Gross refinery inputs increased during the next several weeks as maintenance was completed.
The most readily available source of gasoline supply in California is from local inventory, and as gross refinery inputs fell from 6 – 27 September, the total West Coast gasoline inventory fell 1.8 million bbl to 27.0 million bbl. As refineries resumed operation, total inventory continued to decline, falling to 26.2 million bbl on 11 October, 2.2 million bbl lower than the previous five-year average, before increasing to 26.4 million bbl on 25 October.
Because of the unique product specifications and long distance from international gasoline markets, California does not typically import much gasoline. However, after drawing down local inventories, higher gasoline prices following refinery outages covered the costs for gasoline imports. West Coast gasoline imports reached 191 000 bpd the week of 25 October, while the four-week moving average reached 70 000 bpd compared with an annual average of 23 000 bpd in 2018.
Principal contributor: Matt French
Read the article online at: https://www.hydrocarbonengineering.com/refining/05112019/california-retail-gasoline-prices-fall-after-recent-highs/
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