California Gas Price Woes

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Call it the cruel truth of supply and demand—with a West Coast twist.

In 2012, the major news networks all ran stories about a jump in fuel prices in the Golden State. And they each featured "experts" from AAA and interviews with upset drivers and independent gas station owners.

The spike had a number of causes.

⦁ The Chevron Richmond refinery fire: Chevron's 240,000-barrel-a-day Richmond plant, the largest refinery in Northern California, had been running at reduced capacity since an August 6 fire.
⦁ Power supply issues at the Exxon Torrance Refinery: Exxon's 150,000-barrel-a-day Torrance refinery had a power failure that shut some units and slowed output from others.
⦁ Planned refinery maintenance: Phillips 66 scheduled to perform maintenance on process units at its Rodeo and Los Angeles.
⦁ Challenges with a Chevron crude pipeline that feeds to Northern California Refineries: Chevron's Kettleman-Los Medanos pipeline, which carries crude from Kern County to Northern California refineries operated by Royal Dutch Shell Plc, Tesoro Corp. and Valero Energy Corp., remained shut after elevated levels of organic chloride were detected in the oil.
⦁ Low stocks of summer blend CARBOB (California Air Resources Board Oxygenated Blend): The special, only-in-California blend of gasoline, and refineries switching over to the winter blend of CARBOB early. California's summer-blend fuel requirements are in effect in Southern California until Oct. 31. The Reid Vapor Pressure, or RVP, limits are lifted in other areas of the state as early as Sept. 30.

Here is an example from Reuters.

US WCoast Products: Gasoline stronger in new month

HOUSTON, Aug 23, 2012 (Reuters) Gasoline took a big jump up on Thursday as it changed contract months, traders said. September-delivery CARBOB gasoline sold at 19.75 cents over October NYMEX RBOB gasoline in the Los Angeles market. In the San Francisco Bay market, CARBOB was between 1 cent and 5 cents higher than Los Angeles. August-delivery CARBOB finished on Wednesday at 3 cents over September NYMEX RBOB. September CARBOB is higher because it will change from the summer-blend formula, made to prevent evaporation of smog-causing chemicals, to the winter-blend formula.

We revisit what is going on with fuel costs in the Northeast with our four-part series, Dodging Bullets.

Classification and Oil Volatility

Dodged Bullet: Convert the Refinery Process