Wholesale Gasoline Shortage In California Causes Gas Stations To Shut Down: Hoarding Next?

Tyler Durden's picture

"The squeeze is on, and people are doing desperate things," is how one independent described the situation in California. As Bloomberg reports, a shortage of supply along with drastically higher wholesale prices of gasoline has caused 'mom-and-pop' gas stations to close down as their margins are destroyed. Even larger firms, such as CostCo, are closing sites due to the shortages as Los Angeles and San Francisco gas prices jump 30-45c in a few days.

As one owner noted: "I can get gas, but it’s going to cost me $4.90 a gallon, and I can’t sell it here for $5," and another added that "we’re going to start shutting pumps Friday, as gas is costing me almost $4.75 a gallon with taxes. There’s no sense in staying open. The profit margins are so low it’s not worth it."

The problem is likely a short-term one according to some as the temporary shutdown of local refineries (after Chevron's Richmond refinery fire) and maintenance is completed but it is clear that even a short-term blip in wholesale prices (whether driven by local supply or global geopolitics) causes pain as it would appear we are close to 'inelastic' levels of demand.

  • *VALERO SAYS SUPPLY IN CALIFORNIA HAS TIGHTENED
  • *VALERO SAYS IT HAS TEMPORARILY HALTED SPOT SALES IN CALIFORNIA

California gas has not fallen as the national average has...

 

Via Bloomberg:

Gasoline station owners in the Los Angeles area including Costco Wholesale Corp. (COST) are beginning to shut pumps because of supply shortages that have driven wholesale fuel prices to record highs.

 

Costco’s outlet in Simi Valley, 40 miles (64 kilometers) northwest of Los Angeles, ran out of regular gasoline yesterday and was selling premium fuel at the price of regular, Jeff Cole, Costco’s vice president of gasoline, said by telephone. The company hasn’t been able to find enough unbranded summer-grade gasoline to keep its stations supplied, he said.

 

...

 

Prices Jump

 

Gasoline at the pump gained 8.3 cents to $4.315 a gallon in California yesterday, according to AAA.com, 53.1 cents more than the national average of $3.784. In Los Angeles the price was $4.347. Gasoline futures for November delivery on the Nymex rose 11.15 cents to $2.911 a gallon at 1:35 p.m. today, after falling yesterday to a 10-week low. Retail price movements tend to lag behind those of futures.

 

...

 

“I can get gas, but it’s going to cost me $4.90 a gallon, and I can’t sell it here for $5,” Ravi said. “If you come here right now, I’ve got some diesel left. That’s all. My market is open, but no gas.”

 

A Chevron Corp. (CVX) oil pipeline shut down last month, an Oct. 1 power failure at Exxon Mobil Corp. (XOM)’s Torrance refinery and units down at other plants have cut supplies in the market.

 

Spot California-blend gasoline, or Carbob, in San Francisco surged 30 cents to $1.40 a gallon over futures, also the highest level since at least 2007, at 1:12 p.m. New York time.

 

‘Not Worth It’

 

“We’re going to start shutting pumps Friday,” Sam Krikorian, owner of Quality Auto Repair in North Hollywood, said by phone yesterday. “Gas is costing me almost $4.75 a gallon with taxes. There’s no sense in staying open. The profit margins are so low it’s not worth it.”

 

Exxon’s 150,000-barrel-a-day Torrance refinery may flare gases for a week as it restores production after a power failure that shut some units and slowed output from others, Gesuina Paras, an Exxon spokeswoman in Torrance, said by e-mail Oct. 2.

 

Chevron’s Kettleman-Los Medanos pipeline, which carries crude from Kern County to Northern California refineries operated by Royal Dutch Shell Plc (RDSA), Tesoro Corp. (TSO) and Valero Energy Corp. (VLO), remained shut after elevated levels of organic chloride were detected in the oil.

 

Phillips 66 (PSX) is also scheduled to perform maintenance on process units at its Rodeo and Los Angeles refineries this month, people familiar with the schedules said.

 

Chevron’s 240,000-barrel-a-day Richmond plant, the largest refinery in Northern California, has been running at reduced capacity since a fire Aug. 6.

 

’Squeeze is On’

 

The squeeze is on, and people are doing desperate things,” Bob van der Valk, an independent petroleum industry analyst in Terry, Montana, said by e-mail yesterday. “The mom- and-pop gas stations are having to close down from either not being able to obtain gasoline from their regular distributor or cannot afford the break-even price of almost $5 per gallon.”

 

...

 

Short-Term Problem

 

Van der Valk called the price surge a “a short-term problem.” Wholesale costs should start falling as Exxon’s refinery returns to normal operations and other plants finish maintenance.

 

...

 

“Everybody is concerned about what might happen,” he said. “The real question is: How long is this going to last and what can the state do?

 

...

 

The independent gas station owners are typically the first to run out of fuel and shut their pumps when spot prices surge because they often lack long-term contracts to buy from fuel suppliers at set prices, McKeeman said.

 

Via Contra Costa Times:

"It's a combination of low inventories and multiple California refinery problems," said Tom Robinson, head of Robinson Oil Corp. "Really since the Chevron Richmond fire, inventories have been tight. As other refinery problems occur, there isn't much or any available inventory.

 

"Retailers are not yet reflecting the wholesale price increases they have experienced, so unless supply problems improve quickly, retail prices will definitely be going up."

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prains's picture

lock up your skateboards

redpill's picture

What's the big deal, gasoline isn't part of Core CPI, how important could it be?

CrazyCooter's picture

Exactly. I don't know why all these econ PhDs can't figure out that all one has to do to cure inflation is to just index inflation to the price of plastic shopping bags. Dumbasses.

Regards,

Cooter

Thomas's picture

"retarded idiots" That is a serious double dose of deficiency.

The article seems contradictory: they say they can get it but at too high a price and they say there is a shortage. Which is it?

economics9698's picture

It’s a repeat of 2002 “gray out” where the wholesale market was unregulated and the retail market regulated (in this case by large competitor market prices).  Wholesale prices exceeded retail and wholla, rolling blackouts.

These people, Californians, are complete idiots.

 

Bicycle Repairman's picture

I guess the gasoline just disappeared into the ether.  No way to find out where the bottleneck is and why.  Let a thousand fingers point, and let no one investigate.  If the truth is known in, say 5 years, let's not bother affixing personal responsibility, because that's for welfare mothers and history is for pussies.

It's Chinatown, Jake.

sessinpo's picture

Disappeared?

How about the reality. Say you own a store that sells apples and the government says you have a price ceiling or limit of $1 per apple. Then something happens in the supply chain and all of your suppliers are saying, we won't deliver your supply of apples unless you pay $3 per apple. I'll let logic work its magic here and hopefully, you'll come to the conclusion you wouldn't resupply, thus apples just disappeared as you put it.

Bicycle Repairman's picture

Suppose we pet the magic unicorn?  Will that work in your fairytale?

bankrun's picture

No problem, just make it up on volume.

mjcOH1's picture

Un-possible.   Everyone knows the government produces gasoline for free.    Or at least it can demand the retailers sell at a deficit.   If the government can do it, those greedy bastards can too.  Cause they didn't make that gasoline, somebody else did.

Bicycle Repairman's picture

Like I said.  A thousand fingers point, but the truth is unobtainable.

TheCanadianAustrian's picture

It's like a voilà except more gangster.

RockyRacoon's picture

Well, hell.  Why didn't he just write "walla" like all the other illiterates?  He had to go all fancy on us.

NachoLiebor's picture

voila?

edit: yeah, what he said. With that thingy above the a.

Gangstà

johnQpublic's picture

supply v. demand

 

shortage drives price up

an exxon/mobil station will have a cheaper supply due to large corporation

mom and pop, not so much

can not compete pricewise

disabledvet's picture

Yep. Don't worry...the bailouts are working! And to think people think they should be working for a living! Move along to...to...to..."wherever you puny humans go. Your Goverment our BITCH."

RockyRacoon's picture

I bought me a scooter and lotsa Sta-bil.  Really.  Studied the scooter market for quite a while before buying.

Saw this coming a mile away.

Hacked Economy's picture

I've owned several on- and off-road bikes in my lifetime, and I decided last year to get another small scooter for the same reason, somewhat out of nostalgia for the Honda Elite 50 I had a long time ago.  So I bought a new Chinese model for super cheap, thinking I would only use it sparingly and therefore not worry so much about the quality.

To anyone reading this...DO NOT EVER BUY CHINESE!!  The stupid pile of crap literally began to fall apart after only 1000 miles.  The muffler fell off(!!) while I was riding it, the rear view mirror snapped, and then the ignition sputtered.  The coup-de-grace was how it suddenly died while I was several miles from home in the fast lane of a boulevard.  Never started again, and my trusted moto mechanic said he couldn't even begin to figure out the illogic of Chinese wire looms.

I dumped it into a trash roll-off, wrote a Statement of Fact to the DMV certifying it no longer existed, and promptly bought a quality 250cc motorcycle from a major manufacturer.  Shoulda done that in the beginning.  Pricey mistake on my part.

I also carry plenty of reserve gasoline to account for a short-term shortage of gas or run on the pumps.

RockyRacoon's picture

Correct!  Those Chinese scooters you see on the internet are junk.  I got a Kymco 150cc.  Since the wife is skittish I figured I'd get something she could manage in a pinch, otherwise I'd have gone for a motorcycle.   This one is well made since Kymco also makes some of the Kawasaki 4-wheelers as well.   I'm very pleased with it.   One can think of the Chinese scooters as throw-aways, but that's a bitch when you're miles from home.

knukles's picture

Whoa! 
By that reckoning inflation in my here in my neck of the Great People's Repubelick of Beloved Gentle Socialism is infinite!
Plastic bags went from free to 5 cents!
Taxes!

Gubamint infinite inflation via taxes and monetary policy.

economics9698's picture

Tell your leaders to pass a law and make inflation go away. 

Freddie's picture

Hope & Change.   California = The new Greece with better surfing and Charlie. 

We all know the checks for the $150,000 a year regular paychecks will go out to all the CA unionied Gubmint Workers.

http://www.youtube.com/watch?feature=endscreen&NR=1&v=5FYaexOKuPY

Keep Obama Prisident - he gave us a phone.

 

californiagirl's picture

In San Jose, plastic bags went from free to illegal and pay for a paper bag if you don't bring your own.

bobola's picture

Good.

People will start to ride their push bikes more often.

Today we have this thread about the high cost of gas.

Earlier in the week there was a thread about morbid obesity.

Maybe Tyler will throw up a thread about the high cost of health care by late Friday..??

Combine the solution for these 3 problems and the answer is easy to see - get on the bike and use it for short trips.

 

blu's picture

Careful, starting to sound like a Leftist there. You do own a Ford F350 diesel, right? Ah then you're okay.

LosOsos's picture

The great thing about diesels is they'll burn almost anything. I may be in kalifornia but I have my own refining set up to run waste motor oil in my F250. Alternative fuel = fuck you price shocks and oil companies.

kaiserhoff's picture

Hell yes, who needs a car in Kalipornia..., oh wait.

economics9698's picture

You don’t seem to understand PhD inflation calculations very well ZH’ers.  When inflation helps GDP growth it counts, you know like manufacturing, and when it shows up in the CPI inflation numbers, food, energy, inelastic items below 1.0, delete the item.

It’s complex.

The preferred items that should be used for CPI calculations would be anything that has an elasticity of demand over 2.0, or even 3.0.  The higher the better. 

This is a complex subject for PhDs only, so get away from the curtain and stop bothering the wizard.

saints51's picture

+1 100% correct in so many ways. The Great Fucking OZ.

DaveyJones's picture

but the wizard is the witch

ParkAveFlasher's picture

The CPI hit is easily fixed by reducing the total number of quarts in a gallon to 3.25 for the purposes of calculative expontientalizing pre-modelled scumfuckery.

redpill's picture

Since the universe is accelerating in its expansion, it's really deflation anyway.  You can tell that to grandma since she won't be getting any cost of living increases in her social security, well, ever!

 

ParkAveFlasher's picture

True.  In fact I read in Marketing Weekly that the new Fancy Feast commercial has Grandma slapping the cat off the table and muzzling up on the crystal martini glass herself.

Winston Churchill's picture

Already did that.

The US gallon is 32 ounces short of the UK gallon.

Did it with tons as well,  ton =2240lbs. not 2000 or 2200/

ccwt =112 1bs not 100

Watch that wizard.,he makes stuff dissapear. .

ParkAveFlasher's picture

On that note, does anyone know the difference in ethanol density vs. gasoline?  More hijinx there with volume vs. mass, I'm sure.  Really my question to physics nerds is if energy output per dollar is effected.  In my line of work I see this stuff all the time ... pounds of fluid (!) to kilos to ounces to dollars ... etc ... I love explaining it to Marketers and watching their heads explode.

 

mjcOH1's picture

Energy densities are:

76,100 BTU/gal for ethanol

114,100 BTU/gal for gasoline

Abbie Normal's picture

The local station near the marina just started selling 100% gasoline for only $0.10/gal more than the 10% ethanol-laced stuff.  It's intended for boats but there's no rule against using it in cars.  I'm seeing way better fuel economy so it's a great deal -- pay 2% more and get 10-15% better mileage.  Wonder how long before the govt. closes that loophole....

Danielvr's picture

If they can't sell gas for $5/gallon, maybe they should advertise it at $1.32 per liter..

slaughterer's picture

Pussies, Europeans pay nearly $10/gallon.  Get smaller, more efficient cars.  

Killtruck's picture

Trading in the Silverado and buying my Prius tonight, actually. I'd kill for one of those nice diesels they sell overseas, but thanks to the gubmint I'm limited in my choices.

Ahmeexnal's picture

time to trim those lard assed trailertrash gas guzzlin libtards.

LawsofPhysics's picture

Right, because trailertrash, typically with several shotguns and a large conferate flag in the trailer, is always so liberal.

 

What color is the sky in your world Ahmeexnal?

FYI- real trailertrash run their vehicles on "shine".

Ahmeexnal's picture

You must be still be living in the 80's boy.
Today's trailertrash was yesteryear's middle class.
Take a look at the tent cities springing up in every major city. Most of them were hoaxed into "hope and change". Well, they did get quite some change, didn't they?

LawsofPhysics's picture

No, the trailertrash is still the same in my neck of the woods, sounds like a FEMA camp to me.  We just call that "fodder" around here.

Ahmeexnal's picture

Well, you must be living in a van down the river then. 2008 was a game changer. Middle class sheeple who rode the real estate bubble got burned and got thrown into poverty. Most of them college "educated", many even with multiple PhDs.

http://www.guardian.co.uk/world/2009/mar/26/tent-city-california-recessi...

Tent cities reminiscent of the "Hoovervilles" of the Great Depression have been springing up in cities across the United States - from Reno in Nevada to Tampa in Florida - as foreclosures and redundancies force middle-class families from their homes.

 

Muppet of the Universe's picture

oh shut the fuck you fuckin morons.  everyone is a retard; there are not isms and ists, only retards and smart ppl.  Soo while u buttfags are arguing over symantics concerning really retarded muppet sheepies, you are wasting time you could have spent learning, or fucking, or irl trolling muppets.