Energy

Gas Prices Above $3 in California

CaliforniaThe national average price for a gallon of gasoline on Sunday morning was $2.429. The highest price among all 50 states was California’s $3.205 per gallon, more than a nickel higher than the gas price in Hawaii and nearly $0.35 a gallon higher than in Alaska.

California drivers paid nearly $0.64 in state and federal taxes per gallon of gasoline in January, according to a report at the American Petroleum Institute, the second-highest total in the nation. That is one factor in the higher prices the state’s drivers pay for gas, but it is not the controlling factor.

Another factor in the higher price of California gas are the state’s stringent specifications for cleaner fuel. That adds to the refiner’s costs and is passed through to motorists.

The primary factor in the higher cost of gasoline is the cost of crude. California’s supply of crude oil is either produced in the state or imported. According to the U.S. Energy Information Administration (EIA), California-produced onshore crude cost $53.77 a barrel in December 2014, the latest month for which statistics are available. California’s offshore barrels cost $42.59 a barrel.

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In December, California produced 557,000 barrels a day of crude and consumed about 1.52 million barrels a day of gasoline (this is the EIA’s “product supplied” data). About 20% of California-produced crude comes from its offshore production and the rest from onshore fields. The remaining crude supply is imported.

Alaska North Slope (ANS) crude, which is “imported” into California by tanker, costs $46.73 a barrel before transportation costs are figured in. The delivered price in December was $60.92 a barrel.

The December average price for a barrel of Brent crude was $58.10, according to the EIA and the price of West Texas Intermediate (WTI) at Cushing, Okla., was $50.58 a barrel. California received essentially no barrels at the Cushing price.

In short, California’s weighted average cost of state-produced crude was about $51.53 a barrel, its cost of ANS crude is $60.92 per barrel and its cost for Brent-benchmarked crude is $58.10. If each contributes a third of the crude supply (no data for this, just a back-of-the-envelope calculation), the weighted average cost of a barrel of crude in California is around $56.80, more than $6 a barrel higher than the Cushing price. A rule of thumb is that every dollar increase in a barrel of crude adds about 2.5 cents to the cost of a gallon of gasoline.

Finally, the Tesoro Corp. (NYSE: TSO) refinery in Martinez was temporarily closed for maintenance and remained closed until the labor dispute with refinery workers was settled in mid-March, and an explosion at the Exxon Mobil Corp. (NYSE: XOM) on March 18 has shut down the Torrance refinery. These impacts are temporary, but sharp, and do upset the balance and end up adding to the price California drivers pay for gasoline.

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