By BEN LEFEBVRE, CASSANDRA SWEET and ALISON SIDER
Valero Energy said late Thursday it temporarily stopped
selling gasoline in California's wholesale market as a string
of refinery outages resulted in a
regional gasoline shortage.
Analysts fear the scramble for the motor fuel will send
prices in the state close to $5/gal and force some gas stations
The lack of gasoline pushed California's wholesale, or spot,
prices of $4.10/gal Thursday, a 39% increase from Aug. 6, the
day an explosion shut down Chevrons 245,000 bpd refinery in Richmond.
Those prices don't include taxes, transportation and other
fees, which typically add another 70 cents or more before the
gas reaches the pump.
Valero said it will meet its current contracts to supply
gasoline, but won't sell into the spot market. But spokesman
Bill Day said resumption of spot saleswill depend on
markets and inventories.
The company also will continue to supply gasoline to its
branded and licensed retail stations in the state, Mr. Day
Valero, the largest refiner in the US, took the unusual step
after a series of shutdowns at Richmond and other
Supplies have been further limited by a weeklong shutdown of
a refining unit in late September at
ExxonMobils 149,500 bpd refinery in Torrance. Meanwhile,
Chevron's Richmond facility is only operating at reduced
Adding to supply tensions, Phillips 66 on Thursday announced
its 120,000 bpd refinery in San Francisco was going
to reduce production for an unspecified amount of time due to
Gasoline supplies were further crimped by a shortage of
crude, the feedstock of gasoline, in one part
Chevron shut down of an 85,000 bpd pipeline that ships crude
oil from the San Joaquin Valley to refineries in the San
Francisco Bay area on Sept. 19 after organic chloride was found
in some of the oil put in the pipeline.
A Chevron spokesman said the company was investigating and
was working to clean out the pipeline, called KLM, and return
it to service.
While a single outage - the fear of shortages - can move
prices, the cascade of problems has produced dramatic swings in
prices at the pump.
Service stations in the Los Angeles area were selling
gasoline Thursday afternoon for $4.45/gal, on average, up 11
cents from the start of the day at midnight, according to
GasBuddy.com, on Internet firm that tracks retail gasoline
San Francisco service stations were charging $4.57/gal, on
average, up more than 12 cents a gallon, or 2.8% since
midnight, according to GasBuddy.
Thursday's price jumps in California are the largest
single-day gasoline price increases that GasBuddy has recorded
anywhere in the US since the company started tracking gasoline
prices in 2000, said Patrick DeHaan, a petroleum analyst at
Valeros withdrawal from the broader spot market
signifies that the states fuel market is becoming
illiquid, causing refiners to keep fuel out of the spot market
to ensure they have supply for contracted customers.
West Coast gasoline stocks stood at about 26.6 million bbl
during the last week of September, the lowest amount for that
time of year since 2008, according to the latest data from the
US Energy Information Administration.
Valero operates two refineries in California with a combined
capacity of 213,000 bpd. These refineries haven't suffered
This is a serious problem, said Richard
Hastings, macroeconomy strategist at Global Hunter Securities.
Five dollars a gallon is a plausible concept at this
point, and it won't be $5 at the airport filling station - it
will be all over the place.
As Valero and possibly other refiners leaving the spot
market, independent gas stations not holding supply contracts
will start shutting down after their fuel runs out, said Avery
Ash, manager of regulatory affairs at motorist trade group
American Automobile Association.
The stations that don't have contracts from the major
retailers - the mom-and-pop station and Costcos - may decide
not to sell gasoline at this point, Mr. Ash said.
With spot prices that are well north of $4 a gallon,
you're needing to sell retail gasoline near that $5 mark, and
they may not see the point of doing that.
The situation could last for weeks until West Coast
refineries return to normal production rates, Mr. Ash said.
For Jafar Rashid, the crunch has already come. Mr. Rashid
said he closed one of his Los Angeles filling stations
Wednesday because it became too expensive to buy more fuel for
My street price is $4.69, Mr. Rashid said of his
per-gallon retail price.
But if I was going to buy the gas [wholesale and] it
was going to cost more than $5. I cant pay that,
its too expensive. Id rather close the gas
station, he said.
Mr. Rashid also owns four Chevron stations but said he has
been able to keep those open. The station he shut down
Wednesday will also be converted to a Chevron station soon, he
I don't want to buy independent gas anymore.
Rose Marton and Ken Clark contributed to this
Dow Jones Newswires