California's Gas Price Premium Has Never Been Higher, Here's Why

California's gasoline price premium to the rest of the nation is the highest on record, according to Bloomberg data. This, as OilPrice's Andy Tully notes, is in large part because an Exxon Mobil Corp. refinery in Torrance has been out of commission since an explosion there in February, and the state’s environmental regulations are hampering the company’s efforts to quickly get it back to full production. This situation is not expected to improve by year-end.

 

 

The refinery is now operating at under 20 percent of its potential, mostly because the explosion damaged its two pollution control units, according to Mohsen Nazemi, the deputy executive officer for engineering and compliance of California’s Sourth Coast Air Quality Management District.

ExxonMobil has sought permission to use a previous model of the unit until the newer version can be installed, but was denied because the older unit emits between two and six times more greenhouse gases than the newer model, which would violate state regulations. To use the older equipment, he said, the company would need to show the state that it can contain offset these increased emissions.

In the meantime, ExxonMobil is working to repair the newer pollution control units by replacing about 1,300 plates that trap the emissions, which are made of a fine dust. “That’s not going to happen next week or next month,” Nazemi told the Los Angeles Times. “You’re probably looking at the end of the year.”

This means only higher gasoline prices for Southern Californians at a time when motorists in much of the rest of the United States are benefiting from bargains at the pump due to the plunge in the average global price of oil during the past year.

At one point last week, drivers in Los Angeles County were paying an average of $4.24 per gallon for regular gasoline, an increase of 69 cents from the previous week and 57 more than the average price in June. The same is true in neighboring San Bernardino County, with regular gasoline selling for an average of 63 cents more than the previous week and 51 percent over June’s average.

And these are just average prices. Several service stations in the city of Los Angeles were selling regular gas at $4.99 per gallon, and one had a cost of $5.29 per gallon.

The highest costs are in Southern California, while the northern part of the state is suffering much less, according to Allison Mac, an analyst with the fuel-tracking website GasBuddy.com. “[Northern California] prices have gone up maybe 15 to 20 cents a gallon,” she told the San Gabriel Valley Tribune, “but [in Southern California] we’ve gone up over 60 cents at the same time.”

ExxonMobil’s Torrance refinery isn’t the only reason for the higher gasoline prices, according to Marie Montgomery of the Automobile Club of Southern California. A refinery in Carson California outside Los Angeles owned by the Tesoro Corp. of San Antonio, Texas, also is offline for annual maintenance, she said.

And then there’s the pipeline breach in Santa Barbara County on May 19 that interrupted the flow of ExxonMobil oil to refineries in Southern California, amounting to 150,000 barrels of crude per day. ExxonMobil filed an emergency application to have trucks move the oil until the pipeline is repaired, but the request was denied on the grounds that the situation wasn’t an emergency.

This led ExxonMobil to shut down production at three offshore oil platforms until the flow can resume.