Price shock shuts down Calif. independent gas stations

Oct. 4, 2012

By Wayne Lusvardi

In a scene reminiscent out of the mid-1970’s oil shortages, it is being reported that independent gas stations are being shut down in California due to a shortage of supply and a resulting spike in wholesale gasoline prices.

Bloomberg news is reporting Costco has closed its gas stations in the Los Angeles and San Francisco areas.

San Diego Fox News Station Channel 5 is reporting that gas stations in the San Diego area may be shutdown by Sunday.

Reuters news service is also reporting that Valero Corporation has had to withdraw from the Los Angeles wholesale refined products spot market to assure supplies to its own retail stations.

At $4.90 per gallon for the wholesale price of gas vendors are reporting that there is no profit margin left even if they have gas.

This is reportedly an unexpected short-term crisis due to another one of California’s infamous “perfect storms” of events:

* California refineries are going through their seasonal Kabuki dance of converting to a different blend of fuel for the coming winter months to comply with clean air regulations.

* A fire at Chevron’s Richmond refinery also has compounded the supply problem.  The Richmond refinery is the largest in Northern California and has had to run at reduced production levels since a fire on August 6.

* An Oct. 1 power failure at Exxon Mobil Company’s Torrance refinery.

* Chevron’s Kettleman-to-Los Medanos Pipeline from refineries in the Central Valley to the San Francisco Bay area has been shut down since mid-September after elevated levels of organic chloride were discovered in the oil.  Organic chloride was formerly used by oil producers as a wax dissolver and is considered to be a contaminant. Organic chlorides can cause damaging corrosion to oil processing facilities in a matter of weeks.

* Phillips 66 has a scheduled shutdown of its processing units at its Rodeo and Los Angeles refineries.

“It’s a series of unfortunate events,” said Tom Kloza, chief oil analyst for Oil Price Information Service.  “This is not something that is going to last for months. This is something that is going to last for days or weeks.”

A waiver has been requested from state regulators to expedite the fuel conversion process for winter-grade gasoline.