Refinery woes pump up prices
Repair delays at Exxon Mobil’s Torrance plant lead to higher gasoline costs in the L.A. area.
Los Angeles-area gasoline prices rose over the last week and could tick even higher as a result of unplanned refinery outages and delays in the Exxon Mobil Torrance refinery’s return to full service, fuel experts said.
Exxon Mobil has restored 50% to 75% of the Torrance refinery’s capacity, helping to narrow the gap between the price of a gallon of regular gasoline in the L.A. area compared with the national average, oil industry analysts said. Gasoline prices are about 50 cents a gallon more in the area than the nationwide average. A year ago, when Torrance operated at less than 20% capacity, that gap was about $1.50.
But analysts say the Torrance refinery might not reach 90% to 100% capacity for several more weeks. In addition to keeping gasoline prices up, the delay in the facility’s full return to service is pushing back the pending sale of the refinery to New Jersey-based PBF Energy until July or August.
In addition to the repair delays in Torrance, unplanned outages at other refineries in Southern California as well as at a BP refinery at Cherry Point, Wash., which supplies fuel to California, have contributed to rising gasoline prices in Southern California. The rising cost of oil also is helping to raise pump prices.
Gas prices “did go up a little faster this week than they have for a while,” said Marie Montgomery, a spokeswoman for the Automobile Club of Southern California. “The reports of unplanned maintenance outages contributed to that.”
On Friday, the average price for a gallon of regular in the L.A. area was $2.89, compared with $2.38 nationwide, according to AAA’s daily fuel price survey. The California average was $2.85.
Gordon Schremp, senior fuels analyst for the California Energy Commission, said even the partially restored operations at the Torrance refinery have helped narrow the gas-price gap between California and the rest of the nation. A full return to service should help save Californians a few cents more, he said.
“The good takeaway is [the Torrance refinery] came back and it is making significant contributions to the gasoline market,” Schremp said. With a gap of about 50 cents a gallon compared with the nationwide average, “it’s a lot better than 70 cents, 80 cents and over a dollar differential that we saw last year.”
Gasoline prices in the
L.A. area jumped last summer after an explosion in February 2015 forced the Torrance refinery to operate at less than a fifth of its normal capacity. The explosion destroyed pollution control equipment at the plant.
Loss of refining capacity at the Torrance facility caused gas prices to rise because the plant supplies 10% of the refined gasoline in the state and 20% in Southern California.
Some analysts had expected the plant to return to full service last July. Other projections had the plant fully operating by the end of 2015. But Exxon Mobil couldn’t gain approval for plans to return the plant to service. Californians were left paying high gas prices as inventories dwindled.
In September, PBF Energy said it would purchase the Torrance refinery from Exxon Mobil when the company fully restored the plant.
Exxon Mobil began restarting the plant in May, but Schremp said the company has been unable to demonstrate a minimum of two weeks’ operation without any problems.
“Every time there’s a delay at Torrance, it literally costs California consumers millions of dollars a day,” said Jamie Court, president of the advocacy organization Consumer Watchdog.
Todd Spitler, an Exxon Mobil spokesman, said the company does not comment on day-to-day operations. But he did say that “we continue to make progress on … Torrance refinery's return to full operation.”
Spitler and PBF Energy spokesman Michael Karlovich said they still expect to close on the sale in “mid-2016.”
Bob van der Valk, an independent fuels price specialist, said the oil industry is projecting the sale to take place in August.
“A lot of things went wrong when they started up,” Van der Valk said. “It’s in negotiation.”
‘Every time there’s a delay at Torrance, it ... costs California consumers millions of dollars a day.’ — Jamie Court, Consumer Watchdog president