Tom Elias’s recent column on California gasoline markets repeats a number of preposterous and unsubstantiated allegations and misses the mark entirely in providing his readers any insights into the recent volatility of gas prices in California.
There is ample evidence a short term supply shortage in Southern California has resulted in a supply/demand imbalance. Those generally higher market prices had the expected result of attracting additional imports of fuel by ship into the Southern California market.
As aggravating as these price spikes are for consumers, they indicate a highly competitive California fuels market driven by the laws of supply and demand.
Mr. Elias and other oil industry critics assert that the tiny volumes of gasoline exported from California are somehow to blame for the recent volatility. California refiners regularly export very small amounts of fuel to customers outside of California that does not meet California’s stringent fuel standards designed to improve California’s air quality and therefore can’t be sold in California. For the first four months of 2015, exports averaged about 30,000 barrels per day – a mere 0.07 percent of our daily consumption of gasoline in California.
Mr. Elias did not mention that between March and June, refiners in California imported an average of 82,400 barrels of gasoline per day that conformed to California’s stringent air quality requirements to augment California fuel supplies, according to the California Energy Commission. That’s nearly three times the amount of non-conforming fuel that was exported.
Mr. Elias also erred when he confused publicly available data about refining margins with industry profits. Margins, as reported by the California Energy Commission, are an aggregated measurement of all costs associated with refining oil into gasoline. While it includes refining profits or losses, neither Mr. Elias nor anyone else can determine what refiner profits are from these data.
We understand the frustration caused by fuel price volatility that results from temporary supply disruptions. California’s fuel markets have been subject to higher than average volatility for many years – and that volatility is likely to be a feature of California fuel markets for many years to come as the state continues to adopt increasingly stringent regulations that further isolate California from other fuels markets.