Sunday, July 19, 2015

EIA: West Coast Gasoline Prices "likely to remain elevated until later this summer"

by Bill McBride on 7/19/2015 11:38:00 AM

An interesting article from the EIA: California gasoline prices rise further as lengthier supply chain is strained. A few excerpts:

West Coast spot prices for conventional gasoline increased sharply last week, while falling slightly on the Gulf Coast and remaining flat on the East Coast. The Los Angeles, California, spot price for conventional gasoline increased nearly 90 cents per gallon (cents/gal) between July 6 and July 13, while San Francisco, California, and Portland, Oregon prices increased 24 cents/gal and 5 cents/gal, respectively (Figure 1). This most recent price rise results from a delay in receipts of waterborne imports of gasoline blending components and a decrease in total motor gasoline inventories within an already constrained supply chain.
Gasoline Spot Prices Click on graph for larger image.

West Coast spot gasoline prices typically trade at a premium to prices in other regions of the country because of the region's unique product specifications and relative isolation from other domestic and international markets. As a result, West Coast gasoline markets are primarily supplied by in-region production, and prices react more quickly and strongly during times of local supply shortages. The West Coast gasoline spot price differential has been higher than usual for the past several months following a series of supply disruptions caused by an unplanned refinery outage in February and additional refinery outages in April. Also, West Coast gasoline demand is up 4% in the first four months of 2015 compared with the same time last year, putting additional pressure on the supply chain.
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Other periods of price spikes have occurred in California, most notably in 2008, 2009, and 2012, that were similar in duration and magnitude to the current situation. By early June of this year, the other refineries were back in operation so only the Torrance refinery remains down. Prices will likely stabilize again when imports and inventories increase, but are likely to remain elevated until the repairs to the Torrance refinery are completed later this summer.