California Refinery Breakdowns Push Gas Toward $4 a Gallon

(Bloomberg) -- California drivers are facing the prospect of paying $4 a gallon at the pump for the first time in five years after its refineries were hit by a series of breakdowns.

Pump prices in the most populace U.S. state have gained 12 cents in the past week to average $3.71 a gallon, according to AAA. That’s about three times the nationwide increase. In rural Mono county, near Yosemite National Park, prices are already above $4 a gallon while in San Francisco they’ve risen to $3.86 and in Los Angeles they’re up to $3.79.

“Motorists in California have been hit hard with surging gas prices in the last month, but the situation is about to get worse,” Patrick DeHaan, head of petroleum analysis at GasBuddy, a web-based pricing surveyor, said in a note. Gasoline in the state is “on its way to likely hitting $4 per gallon for the first time since July 27, 2014” in the next two weeks.

Retail prices are surging after Valero Energy Corp.’s refinery in the Bay Area stopped oil processing after about a week of smoky emissions prompted air quality warnings. In Southern California, a fire at the Phillips 66 refinery in Los Angeles was said to lead to the shut down of the crude processing unit and the ramping down of other units to minimal rates. The gasoline-producing fluid catalytic cracker at Chevron Corp.’s El Segundo plant, the largest refinery in the state, has been down since April 1, according to Genscape Inc.

Golden State gasoline currently costs more than any other state in the union, according to AAA. Even in Hawaii, normally the most expensive, prices were about 20 cents a gallon cheaper. California’s unique clean-burning gasoline blend that’s only produced by local refineries and a handful of others around the world, as well as its lack of import pipelines, has made the state an energy island where refinery disruptions can cause wild swings in prices.

Compounding the refinery disruptions, the state is going through its switch to summer gasoline from winter gasoline, leaving the motor fuel stockpiles 17 percent below year-earlier levels last week, according to California Energy Commission data. The price of ethanol, which is added to gasoline, is also higher after flooding in the Midwest in recent weeks.

Retail prices tend to rise on the back of surging wholesale prices. California-blend gasoline in L.A. gained 5.5 cents versus New York futures to a 49-cent a gallon premium Friday, the widest premium since December when another spate of refinery issues plagued the state, data compiled by Bloomberg show. The premium in San Francisco widened 6 cents to 42 cents a gallon, the most since May 2017.

To contact the reporter on this story: Robert Tuttle in Calgary at rtuttle@bloomberg.net

To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net, Mike Jeffers, Jessica Summers

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