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Wednesday, July 29, 2015

Wednesday, July 29, 2015 -- Part V; $5 Gasoline In California Could Last Months


Updates


May 6, 2016: Torrance refinery to re-start.  
 
October 22, 2015: XOM sells Torrance, CA, refinery.  

Original Post
 
Tweeting now: US refinery throughput edged down -108,000 b/d last week but is still close to record and +211,000 b/d above prior year; imports down 2.8 million bbls compared to previous week; and, US crude oil stocks fell 4.2 million bbls. Refineries are struggling to keep up with demand.

Tweeting now: propane supplies continue to hit new record; surging. Comment: RBN Energy has covered this in depth. Some operators are paying to have their propane taken away.

Tweeting now: US gasoline consumption averaged 9.5 million b/d over the last four weeks, about +560,000 b/d above last year.

And this is why gasoline is still expensive in California:  West coast refineries continued to raise output but it remains 75,000 b/d below 10-yr average when demand is booming. Comment: one of the largest refineries in California, and perhaps the most important in southern California, the XOM refinery in Torrance remains at 20% capacity (as far as I know) due to recent explosion of its pollution control units. Yes, here it is, at The Los Angeles Times July 17, 2015:
The refinery that has historically produced about a fifth of Southern California's gasoline has been crippled since a February explosion — and may stay that way for months to come.
The trouble at Exxon Mobil's refinery in Torrance is a major factor pushing up regional gas prices, which have risen dramatically this month. Restoring the site to full capacity is among the best hopes for bringing prices back down.
The Torrance refinery currently operates at less than 20% of its capacity.
Exxon Mobil asked the management district for approval to use an old pollution control unit it replaced in 2008 to temporarily restore full operations of the Torrance refinery, but regulators said the equipment does not capture emissions well enough. Emissions from the older unit would violate state regulations and rules.
For those who still don't understand why gasoline in southern California can cost nearly $5 / gallon:


Having said that, did you notice something even more remarkable in the graph above? In fact, the gasoline stockpiles were actually running higher than last year from Week 13 to Week 26. The blast at the XOM refinery occurred on/about February 18, 2015, the 8th week of this year. In other words, the gasoline stockpiles were actually lower last year at this time, and I don't recall any explosion shutting down a major refinery in California at this time last year. In fact, California reached its historic low of gasoline stockpiles last year in Weeks 15, 23, and 26 or thereabouts (hard to tell from the graph).

I truly thought the XOM refinery explosion was the main culprit, but it appears that the explosion simply exacerbated something else already going on in California. Call me naive, but it certainly looks like the refineries in California have not been able to keep up with increased demand for gasoline over the past ten years in California. If this is accurate, $5 gasoline is going to be a recurring nightmare for Californians every summer (and that $5-gasoline driving season will arrive earlier each spring and last longer into each autumn). My hunch is that the Californians will catch on to what is happening sometime in 2018.  

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