California’s gasoline imports increase 10-fold after major refinery outage

Over a five-month period following an explosion at a California oil refinery in February 2015, imports of gasoline into California increased to more than 10 times their typical level, drawing from sources that include India, the UK, and Russia.

Imported gasoline has been arriving from all over the world (see graph above) at rates of 28 000–68 000 bpd for March through July (the latest data available). These levels compare with an average of 5000 bpd in 2013-14.

California gasoline markets continue to adjust to the 18 February explosion and fire at the ExxonMobil refinery in Torrance, California, located southwest of Los Angeles. The ExxonMobil refinery is the third-largest refinery in Southern California. The refinery unit affected by the explosion, the fluid catalytic cracker (FCC), is essential to making gasoline. Torrance's FCC represents 22% of the region's total FCC capacity, making it a key source of gasoline and distillate fuels that meet California's very stringent fuel specifications. On 30 September, ExxonMobil announced the sale of the refinery to PBF Energy, which will be PBF Energy's first refinery on the West Coast once the sale is complete.

Because of its unique product specifications and long distance from international gasoline markets, California specifically, and the West Coast in general, does not typically import much gasoline. As a result, the sudden loss of supply from the Torrance refinery resulted in immediate supply shortfalls and higher wholesale and retail prices. The higher wholesale prices covered the costs of importing more gasoline from distant markets into California to make up for the supply shortfalls.

The US Energy Information Administration's company-level import data show that from March to July, California imports of motor gasoline averaged 52 000 bpd, from 15 different countries. The main supply sources have been refineries in India and the United Kingdom, averaging 13 000 bpd and 11 000 bpd over that time, respectively. California has also imported an average of 5600 bpd from Russia over that period, along with smaller amounts from refineries across Europe and Asia.

Most of the imported gasoline has arrived in Southern California ports (Long Beach, Los Angeles, and El Segundo). From March to July, more than 50% of the imported motor gasoline volumes have been classified as "all other motor gasoline blending components," indicating that the gasoline material being imported consists mostly of higher octane blending components such as alkylate and reformate, which are then used to make California-grade gasoline.

With the Torrance refinery still offline, wholesale and retail prices in California have remained higher than in other areas of the country. Since the outage (mid-February through September), wholesale spot California grade gasoline prices in Los Angeles have averaged US$2.17 per gallon (gal). This price represents an average premium of US$0.38/gal compared to the front month futures contract of reformulated blendstock for oxygenate blending (RBOB, the petroleum component of gasoline) from the New York Mercantile Exchange (Nymex). In July, Los Angeles spot gasoline prices hit US$3.39/gal, or US$1.35/gal higher than the Nymex RBOB. In September, Los Angeles spot prices averaged US$1.69/gal, an average premium of US$0.31/gal compared with Nymex RBOB.

The increase in spot wholesale prices also has resulted in higher retail gasoline prices, particularly in Southern California. California retail gasoline prices are typically higher than the US average as a result of higher taxes and differences in gasoline specifications. However, California and Los Angeles retail prices for regular gasoline averaged US$0.96/gal and US$1.27/gal higher than the U.S. average in July, respectively, and averaged US$0.76/gal and US$0.90/gal higher in September. However, California and Los Angeles retail prices are US$0.72/gal and US$0.62/gal lower than the same time last year, respectively, reflecting the broader decline in crude oil prices.

Edited from press release by Angharad Lock

Read the article online at: https://www.hydrocarbonengineering.com/refining/14102015/californias-gasoline-imports-increase-10-fold-after-major-refinery-outage/