California’s fuel market, where gasoline prices have been consistently higher than the national U.S. average, has seen multiplying challenges in recent years, which resulted in new state legislation and an announcement of a refinery closure in October, the Energy Information Administration (EIA) said in an analysis on Monday.
As of December 9, the average U.S. retail price for a gallon of regular gasoline was $3.018, according to AAA data. Retail gasoline prices in California, however, averaged $4.365 per gallon. California retail gasoline prices are consistently among the highest in the country and regularly exceed the U.S. average price by more than $1 per gallon.
“While multiple factors contribute to higher retail gasoline prices in California, including higher crude oil costs and higher refining costs on the West Coast, the region has also historically maintained lower inventory levels relative to the rest of the country,” the EIA said today.
To address and possibly prevent the wild swings in California’s gasoline prices, Governor Gavin Newsom signed in October legislation that allows the state to require oil refiners to maintain a minimum inventory of fuel to avoid supply shortages. The ABX2-1 law also authorizes the California Energy Commission (CEC) to adjust minimum storage volumes based on regional and seasonal market conditions, refinery size, and storage capacity, and also empowers the CEC to consider the use of a tradable mechanism for compliance with the minimum inventory law, which the state has used in the past for programs such as its Low Carbon Fuel Standard (LCFS).
Days after the Governor signed this legislation, Phillips 66 said it would stop refining operations at its 139,000-bpd Wilmington refinery in Los Angeles in the fourth quarter of 2025.
Phillips 66 said that the planned closure is not an immediate or hasty reaction to California’s new legislation, but a long-term view that refining in the state would become even more challenging than it is now.
Phillips 66 has already converted its San Francisco refinery into a facility to produce renewable diesel. The end of refining at the Wilmington refinery in Los Angeles will see one of the top U.S. refiners officially stop all crude oil refining operations in the state of California.
By Charles Kennedy for Oilprice.com
