Friday, October 05, 2012

Life in "Progress" State - California edition

Gasoline station owners in the Los Angeles area including Costco Wholesale Corp. (COST) are beginning to shut pumps as the state’s oil refiners started rationing supplies and spot prices surged to a record. 

Valero Energy Corp. (VLO) stopped selling gasoline on the spot, or wholesale, market in Southern California and is allocating deliveries to customers. Exxon Mobil Corp. (XOM) is also rationing fuel to U.S. West Coast terminal customers. Costco’s outlet in Simi Valley, 40 miles (64 kilometers) northwest of Los Angeles, ran out of regular gasoline yesterday and was selling premium fuel at the price of regular. 

The gasoline shortage “feels like a hurricane to me, but it’s the West Coast,” Jeff Cole, Costco’s vice president of gasoline, said by telephone yesterday. “We’re obviously extremely disheartened that we are unable to do this, and we’re pulling fuel from all corners of California to fix this.” 

Spot gasoline in Los Angeles has surged $1 a gallon this week to a record $1.45 a gallon premium versus gasoline futures traded on the New York Mercantile Exchange, data compiled by Bloomberg show. That’s the highest level for the fuel since at least November 2007, when Bloomberg began publishing prices there. On an outright basis, the fuel has jumped to $4.3929 a gallon.

1 comment:

Becbeq said...

Just great. I used to live there, still have relatives there. I used to work in the oil/gas industry in California back, oh 1994-1996 (for a company that eventually became Valero), as a financial analyst.

The BIG problem with California is that it is a closed market for gasoline. Due to the strict regulation on gasoline, companies CANNOT import gasoline INTO California. Refineries in the state had to make billions of dollars in upgrades to their refineries to meet the requirements – hence the reason CA gasoline is always 5-10 cents above other states – it’s more expensive to refine. But, if the margin is better, companies are always welcome to *export* the gasoline, either to other states, or in one case I remember, by tanker to other countries.