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California Fuel Prices Set to Soar as Refiners Undergo Work

·2 min read

(Bloomberg) -- Gasoline and diesel prices in the Golden State may soar to fresh records in coming weeks as one of the largest refineries on the West Coast starts maintenance.

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Chevron Corp. is scheduled to carry out multi-unit maintenance at its Richmond refinery on the San Francisco Bay, which is expected to last for about a month, according to people familiar with operations. The planned work includes gasoline-making units and comes as both Phillips 66 and PBF Energy Inc. are already conducting upkeep at diesel and jet fuel-making facilities.

California gasoline pump prices at $6.435 a gallon remain far above the national average, according to auto club AAA. In Napa, the most expensive metro area in the country as of Tuesday, prices are as high as $6.63 a gallon. The national average is $5.01 a gallon.

“California is particularly vulnerable to refinery maintenance because inventories are low and the West Coast, unlike the Gulf Coast, is not connected to pipelines that can bring in supplies quickly,” said Felipe Perez, a downstream director at S&P Global Inc. based in Los Angeles. On top of that, he said, the ability of fuelmakers to boost production is somewhat limited because they are wary about operating near 100% of capacity due to environmental restrictions.

Retail prices have soared even as stockpiles have remained ample so far this season. At 31.4 million barrels, the West Coast has more gasoline to burn for this time of year than in the last three years. Any potential supply disruption could tip prices even higher.

Growing maintenance coincides with a drop in imports from Asia, where expensive freight has narrowed the arbitrage economics for trans-Pacific shipments. Around 50,000 barrels a day of gasoline and blending components have arrived on the US West Coast from Asia so far this month, less than half of May arrivals along the same route, according to data from oil analytics firm Vortexa.

(Updates with analyst comment in fourth paragraph)

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