Gas prices will increase from 3 to 15¢ a gallon by Monday, and
it has nothing to do with Syria and a LOT to do with the fact that
almost 1/3 of California's refining capacity has been shut off.
Analysts like cause and effect, and when they don't know WHY
prices are going up they always reach for the latest current
event to explain the situation. If you hear analysts blaming
Syria for our high gas prices in the next few days, don't
believe a word they say. There is no correlation. Syria does
not supply California with any gasoline.
In this case the root cause is simple: California refineries
are exporting massive cargoes of gasoline away from the state
to eliminate surplus. In addition, almost 1/3 of California's
gasoline manufacturing capacity has been shut down since last
Gas prices are going up. There are two ways to artificially
increase gasoline prices in California. The first is to export
all available surplus (often at a loss) to Mexico and South
America. That's what happened a week ago, but the announcement
of a major export program was not enough to significantly
spike prices, which brings us to the second way that refineries
create shortages: By shutting down the operation or reporting
an unplanned flaring, which usually panics the spot market for
surplus fuel, driving prices up.
In the last seven days, California refineries reported the following:
Valero, near San Francisco, shut a fluid catalytic cracking unit down
at its 135,000 barrel per day refinery in Benecia, according
to HazMat filings with the CA Emergency Management Agency last
Shell (also in Benecia), near San Francisco was flaring at its 158,000 barrel
per day refinery last Thursday, with additional problems reported
earlier at its Martinez refinery earlier in the week.
Tesoro Martinez, also near San Francisco, has reported problems
after shutting down an unidentified major process unit on Friday
at its 170,000 barrel per day Golden Eagle refinery for unplanned
Phillips 66, Los Angeles, reported that its wet gas compressor
system broke down on Thursday morning at its 147,000 barrel
per day Wilmington refinery.
Most of the problems are in Northern California, but it will affect
our local gas prices. Here's why: Barrel per day output at California
refineries is roughly 1.95 million barrels a day. The refiners listed
above manufacture a daily output of roughly 610,000 barrels a day. What
this means is that about 31% or nearly 1/3 of the manufacturing
capacity for gasoline has been taken offline since Thursday.
This is about supply and demand. The refineries in California have
restricted supplies through exports and shutdowns, and this allows
them to demand more money for their remaining gasoline.