Gasoline prices in California has historically been among the highest in the United States, and the drop in supply after a refinery shutdown earlier this year is not helping.
The Energy Information Administration (EIA) reports gasoline imports to California increased tenfold in the five months following a refinery explosion. The incident occurred in February at a facility operated by ExxonMobil (ticker: XOM) in Torrance, California, south of Los Angeles. Operations have yet to resume due to a shutdown order from the California Division of Occupational Safety and Health. Analysts believe operations may not start again until 2016.
According to ExxonMobil, the site produces 1.8 billion gallons of gasoline annually and accounts for approximately 10% of all gasoline sold in California and 22% of supply in Southern California. Its other destinations include Arizona and Nevada.
The facility was sold to PBF Energy (ticker: PBF) in September for approximately $537 million.
The EIA notes the West Coast’s unique product specifications, relative isolation from other markets and reliance on in-region production can lead to “quick and strong” price reactions in times of supply shortages.
The immediate shutoff of the region’s third largest refinery is evident at the pump, where prices have climbed to account for the increased imports. The EIA says imported gasoline ranged anywhere from 28 to 68 MBOPD in a five-month stretch from March to July in 2015 (averaging 52 MBOPD), compared to an average of just 5 MBOPD throughout all of 2013 and 2014.
Americans logged a record amount of diving miles in the first six months of 2015 and auto sales neared all-time highs, adding to the stress on the California gasoline market. The spread between Los Angeles and NYMEX spot prices peaked at $1.35/gallon in July, while retail prices were $1.27 above the national average in the same month. The spread narrowed significantly in September, with spot and retail prices closing to premiums of $0.90 and $0.62, respectively.
Today, prices for regular-grade gasoline is $3.49/gallon along the Malibu coast, according to www.gasbuddy.com. For those interested, Comanche, Texas, currently has the lowest gasoline prices in the country at $1.79/gallon.