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Do Local Refineries Play A Major Part In High West Coast Gas Prices?

Maintenance closures, operational issues and other interruptions in the supply of gas from west coast refineries have gas prices soaring in the west, one researcher charges.

With gas prices at west coast pumps higher than those elsewhere in the country, some in the federal government are asking if recent refinery closures on the west coast are the result of a coordinated effort by the companies. One congressperson has called for an investigation into the charges, though the companies deny that such collusion exists. 

Gas prices are an average of $3.45 per gallon in Michigan, $3.35 in Florida, $3.35 in Texas, and $3.65 in New York City. In Martinez, gas prices are over $4 per gallon. 

Sen. Maria Cantwell, D.Wash, has asked the Federal Trade Commission to investigate Shell, Tesoro, Conoco-Phillips, Alon, Chevron and BP for possible collusion into raising the price of gas, according to a story by McClatchy News Service. Refinery spokespeople say prices are the result of market demand, and not collusion. 

In other refinery news, the Martinez Shell Refinery notified the California Emergency Mangement Agency that it had released sulphur dioxide into the atmosphere around 12:20 p.m. Friday due to a flare. 

Meanwhile, Tesoro workers at the Martinez Golden Eagle Refinery have agreed to a new contract, the last group of unionized Tesoro workers to do so. The members of the United Steel Workers had authorized a strike vote if an agreement could not be reached, but apparently a strike is no longer a threat.

 

Patrick J. McNamara June 11, 2012 at 02:06 PM
All refineries routinely close around 35% of their production capacity on a rotating basis for intensive maintenance and refitting of crucial infrastructure that cannot be worked on while product is running through it at high heat and pressure. They call this "turnaround." It involves massive staffing up to minimize the time off line, which can cost a refinery tens of millions of dollars per day. Doing it is why explosions and fires are so rare. We claim to want this. In the rest of the country, that temporary supply interruption is easily made up for by the ability to buy in gas from the commodities spot market at the best prices available. But, thanks to the visionary geniuses in the California Legislature and the unelected cabal in the ARB, California has imposed unique and special gas formulas that the refineries must produce for us here in California. Gas retailer companies and distributors cannot go elsewhere and buy on the open market. Our leaders, secure in their one party rule, have decided that Californians will be like those religious zealots that ceremoniously whip themselves bloody as an example to the less devout. We will show the way to sustainable virtue, and we will like it. You think California has high gas prices now? Wait until AB32 takes full effect. Then we will be especially virtuous, to no discernible effect on global environment.
Bob Amerine June 12, 2012 at 05:41 AM
Your explanation does nothing to explain Washington and Oregon price spikes, going UP, while the national prices go down. They do NOT use the Calif blend, and still are getting hosed. Also, given the pay the execs are pulling down at these companies, wouldn't one be thinking they'd adjust timing maintenance shutdowns, to NOT coincide with shutdowns resulting from accidents and fires? UNLESS of course, they just happen to result in a price spike, meaning bigger profits? This needs not only to be investigated, but, followed up with some discussions with the oil industrial heads, pointing out the national security issues that our economy is centrally a part of. A bankrupt nation is weak, and IF, that nation is being bankrupted by a few oil companies, we should treat them as they are, a threat to our national security, financially subverting the nation. NATIONALIZE them, if their aim is to break the nation.
Patrick J. McNamara June 12, 2012 at 02:32 PM
Turnaround maintenance is scheduled a year out. The undertaking is so massive and must be coordinated with so many different trade unions as to ensure that enough manpower is available for the many weeks of expensive, well paid work, including overtime if needed. There is no secret star chamber of oil tycoons waiting and watching for hurricanes or other unplanned disruptions so that maintenance can be swiftly announced to subvert the nation. But apparently it is not the nation these villains wish to subvert, right? Just the west coast? How did Nevada, Utah and all the rest escape this evil plot? I guess it's not national security that's at stake, but merely the west coast's security? You are incorrect that the west coast prices go up when the rest come down. Everyone goes up together, and comes down together. It's just that west coast and Hawaii prices rise higher, and come down commensurately slower. Our little center of the universe here in California is not the victim of an evil plot, but rather of misguided good intentions from Sacramento. The day Rotten Robbie stations can buy in wholesale gas from their collectives who hedge against fuel spikes by purchasing unleaded gas futures contracts on the commodities exchange, your evil plot will have been foiled. Until then, the well-paid and politically connected regulators should be the subject of your hand wringing, IMO.
Linda Meza June 12, 2012 at 03:08 PM
Good point Pat. Independent stations, like Rotten Robbie, do price shop independent distributors like Golden Gate, Olympian, and San Francisco Petroleum. There used to be a time when these distributors did dabble in the futures market when the true oil cartel, OPEC, was more or less predictable. Add into the mix wildcards like Venezuela (with its nationalized oil - can't nationalize a resource we don't own) and things got a tad bit more hairy. The rack rate the distributor pays is quite different than the eventual retail rate the consumer pays. If we're using Rotten Robbie as an example, they'll go out to bid and depending on how much fuel they're buying could ask for bids based on an Opis + or a Rack + rate. By the time that fuel is in the ground you've added California tax, Federal tax, local tax if any, loyalty card costs (since no one pays cash anymore and merchants aren't absorbing this) and a few pennies on the gallon profit.
Patrick J. McNamara June 12, 2012 at 04:32 PM
No matter where California independents shop their fuel, it is required to have originated from a California refinery that makes the mandated California formula. No cheaper Nevada gas for us. Add to that the impossibility of adding any new refineries in California (or elsewhere in the USA for that matter) and you can see how the supply/demand equation that ultimately determines price is skewed in California. Just wait until California refineries (and ONLY California refineries) are required to start buying carbon credits and passing that cost on to California drivers (and ONLY California drivers). Gratifying to know that the CA legislators and Governors Schwarzenegger & Brown--who cooked up that plan--will continue to have their own vehicles and fuel provided by the rest of us for free. A small token of our thanks for allowing us all to be so virtuous.
Chris Kapsalis June 12, 2012 at 05:08 PM
Why is gas so much cheaper 200 miles away from the refinery? You would think with trucking it there it would go up a bit, not way down in price. Check gas prices in Red Bluff for example. 3.89 a gal today, as Martinez where it is made, 4.03 a gal today.
Patrick J. McNamara June 12, 2012 at 05:29 PM
Chris I have never been able to figure that out either. Shouldn't we get a local discount on Shell gas at least? I wonder what the price effect is in Oregon, of the prohibition against self-serve.
Chris Kapsalis June 12, 2012 at 06:05 PM
I havn;t been to Oregon in about 8 years, but last time in Springfield it was way cheaper than here. and rents were way cheaper. The gas alone to truck gas to Redbluff, one tanker, must b gets me moste 30 gallons at 4 a gallon. So that is $160 in gas right? And truck time, and paying the truck driver etc. WHY? And we have the burden of having the refinery here. We should get a discount.
Donald Pallotta June 12, 2012 at 11:06 PM
I don't even claim to know the market reasons for price deltas, but just for the record, not all gasoline is trucked on the west coast. There are many networks of pipelines that serve to move product all over the region and for that matter, all over the United States.
Chris Kapsalis June 13, 2012 at 01:39 AM
You are correct. Natural gas is piped all over California, but refined gasoline is only piped from Bay area refineries to Stockton and Sacramento. The cost of piping it, the pipe cost itself and maintenance, then the trucking of the gas from Sacramento to Say Redding, in all we should still receive a discount or cheaper gas. And what about supply and demand? Demand is very high in the Bay area, and the supply is more, which should also lower our cost of gas, hmmm, get's even stranger ...
Linda Meza June 13, 2012 at 02:26 AM
Sorry Chris, but you're incorrect. There is a terminal (rack) in Eureka and Chico. There are racks in Sac, Martinez, South San Francisco, San Jose, Richmond and Benicia. http://www.energy.ca.gov/maps/powerplants/refinery_locations.html
Chris Kapsalis June 13, 2012 at 04:30 AM
I see refined patrolium only going to Stockton and Sacramento by pipeline. http://www.google.com/imgres?q=california+gasoline+pipeline+map&um=1&hl=en&safe=off&biw=1280&bih=593&tbm=isch&tbnid=W-eGekA7HhOCtM:&imgrefurl=http://ntl.bts.gov/DOCS/ctp2.html&docid=oUfGCe8Jb7bm8M&imgurl=http://ntl.bts.gov/DOCS/images/CTP2/ctp2-20.gif&w=500&h=541&ei=fxbYT-jtIeTC2QWH1qXDBw&zoom=1
Chris Kapsalis June 13, 2012 at 04:34 AM
Ooops, 1993. Still though, We should still get it cheaper I think.

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