California Gas Prices Expected to Spike in Wake of Shutdown at Valero’s Benicia Refinery

Repost from KQED California Report

By Ted Goldberg, Mar 26, 2019
Valero’s Benicia refinery on March 24, 2019. (Solano County)

California drivers — or the millions of them whose cars still run on refined petroleum — can expect to pay more to fill up their gas tanks in the coming days thanks to the partial shutdown of Valero’s Benicia refinery.

The retail cost of a gallon of gasoline in the state is expected to rise immediately, according to David Hackett, president of Stillwater Associates, a transportation energy consulting company based in Irvine.

That’s after a 12-cent spike in wholesale gas prices on Monday, Hackett said.

“That price increase is likely to get passed through to motorists over the next week or so,” he said. “You’ll start seeing prices go up starting probably today.”

The average cost of a gallon of regular unleaded gasoline in California is $3.51, 16 cents higher than a week ago, according to AAA.

Several agencies are investigating a series of petroleum coke dust releases at the Benicia refinery that began more than two weeks ago. Those releases intensified on Sunday, prompting city officials to issue a health advisory.

The Valero refinery’s flue gas scrubber malfunctioned, a problem that led to a sooty plume of petroleum coke to billow out of the facility’s smokestacks. To deal with the problem, the refinery is slowly shutting down a significant part of its operations.

Last week, problems at two other California refineries contributed to the recent jump in gas prices.

AAA says a fire at a crude processing unit at the Phillips 66 refinery in Los Angeles County and a series of flaring incidents at Chevron’s Richmond refinery drove prices higher.

AAA spokesman Michael Blasky said price spikes are the norm when refineries suffer problems that lead to curtailed production.

“When a refinery goes offline and supply drops, retailers incorporate price increases almost immediately in California,” Blasky said.

Wholesale suppliers that sell fuel to gas stations and hear about the Benicia refinery’s shutdown will probably go into the so-called spot market to buy gas, sending the price up, Hackett said.

The refinery problems come amid a jump in the price of crude oil over the last year, which has sent gas prices up nationally.

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