Posted in: Gas Prices,
by Patrick DeHaan on May 10, 2012 11:35 AM
In my post Monday, I highlighted that gasoline prices would be falling nationally with the exception of the West Coast. I can't highlight this enough for those who may not have read it, and want to hold me personally responsible later for my forecast, so here it is again. Prepare to get clobbered.
Motorists in California should take note the most. We're also likely to see collateral damage in Oregon, Washington, perhaps even Nevada and Arizona, but to a lesser extent in those last two, respectively.
Prices in these areas could shoot up dramatically in the next few days or week, in the worst areas it could have risen 25-40 cents per gallon since the start of May by the time the increases are over. California could see the highest prices of the year occur in this mid-May stretch. I certainly don't think there's a reason to panic about this. There will still be gasoline. This warning is to prepare yourself, or make plans, knowing that gasoline prices may jump a good amount soon.
Thank much of the sudden jump to ever dwindling inventories of summer (CARBOB) gasoline. California uses its own blend of cleaner burning gasoline that meet's CARB requirements. Refineries have been having a lousy spring- with not just one massive facility outage, but smaller more widespread issues. So bad has it been that gasoline inventories are at their lowest in 20 years at this moment. All of this is one big regional issue, which is not likely to spread very far, thanks to the tall rugged Rocky Mountains that separate the West Coast market from the rest of the country.
While I hope the problem resolves itself quickly, it'll take many weeks of solid refinery production to erase the big deficits in gasoline inventories. Just last week, California's Energy Commission reported CARBOB inventories down nearly 33% from the previous year, and down nearly 10% just in one week. That's worrisome no matter what region it occurs in, and since it occurs in a market that isn't interconnected like most regions east of the Rockies, it is an issue that may linger.
You see, if this was a supply problem in the Great Lakes, Gulf Coast refiners could simply send material north. But in this case, there's basically no other refineries that produce CARBOB or are connected to the West Coast. We could equate this situation to Frodo in Lord of the Rings, no one else can help the West Coast, this is their issue to resolve and work out.
So other regions, east of the Rockies, go ahead and breathe a sigh of relief. Virtually anywhere east of the Rockies gasoline prices will still be slowly heading downward for the next few days or perhaps longer. Completely different story for you Californian's (and other West Coast motorists). You had your warning. Be ready.