Calif refinery work behind gasoline rise: Regulator

Current refinery maintenance is driving a "significant" gasoline price increase in California and a "troubling" lack of supply, the state's Division of Petroleum Market Oversight (DPMO) said in a letter to governor Gavin Newsom (D) today.

Several maintenance events at refineries across California and declining gasoline inventories are contributing to the increased prices, which are most noticeable in the north of the state, the DPMO said in the 13 September letter. "California is once again seeing a significant spike in gasoline prices," it said.

This is the first instance of the DPMO commenting on emerging price increases in California, fulfilling its mandated role of state petroleum market watchdog established with its creation as an independent agency within the California Energy Commission (CEC) last year.

It is not clear what refinery maintenance DPMO is referring to. PBF Energy reported a hydrocracker malfunction at its 160,000 b/d Torrance refinery this week while Marathon Petroleum's 365,000 b/d Los Angeles plant, the largest in California, was shutting units in August and flaring earlier this month. Valero reported a power outage at its 85,000 b/d Wilmington refinery in late August.

Spot market gasoline prices have "surged" while crude and national average gasoline prices have declined, the DPMO said. Retail prices have not reached the record highs of price spikes in 2022 and 2023, but there is a growing gap compared to the US national average, the agency said.

The average retail price of gasoline in northern California averaged $5.02/USG on 12 September, $1.92/USG higher than the rest of the country and a $1.48/USG premium in late August, according to DPMO data.

"In current market conditions, California refiners may seek to sell gasoline at prices far exceeding any increase in their own input costs," the DPMO said.

The refining industry has been in Newsom's cross hairs since last year's passage of SB X1-2, his bill aimed at combating what he views as price gouging by refiners. This garnered significant push back from companies and industry groups for what they see as a politically motivated misdiagnosis of what makes California retail prices higher than other states' prices.

On 15 August, Newsom unveiled a proposal to require refiners to hold minimum inventories of gasoline. An initial information hearing on that proposal is scheduled for 18 September.

By Nathan Risser