Wholesale California Gasoline Prices Plunge, Consumers Still Pay Up

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Wholesale gasoline in California became the cheapest in the country this week, but that change has largely gone unseen at the pump, where consumers are still paying the highest prices in the continental United States to fill up their cars.

Ample inventories along with relatively stable refinery operations and imports has driven down the spot value of gasoline in Los Angeles at the wholesale level by more than 60 cents since mid-June.

However, that has not translated to similarly lower retail fuel prices for consumers because of peculiarities in California's market. The declines in the state's retail gasoline market over that period of time have averaged less than 14 cents, according to data from the U.S. Energy Information Administration.

On Thursday, wholesale California gasoline was trading below $1.20 a gallon. The spread between California's wholesale and retail gasoline markets was about $1.50 a gallon the week to July 25, about 40 cents wider than a similar spread in the New York market.

California is one of the most expensive places in the United States to produce gasoline because of the state's unique blending requirements and its relative isolation from the rest of the country, which makes securing crude oil to refine pricier.

Gasoline prices across the country have plunged as crude has also slumped in the past two years, pressured by a global supply glut. On the West Coast, gasoline stocks are at a five-year seasonal high of 29.6 million barrels, according to the EIA. GL-STK-5-EIA.

The declines in the spot market nationwide have translated to cheaper prices for most U.S. consumers. In Texas and New York, average retail prices are down a respective 41 percent and 39 percent since mid-2014. Californians have enjoyed just a 32 percent dip in that time.

"We are still seeing retail prices on the downward drop, but they are not dropping as fast as the rest of the country," said Michael Green, spokesman for AAA.

While some of this can be explained by higher taxes and regulatory fees, consumer advocate groups say the bigger problem is the percentage of the retail market controlled by refiners, versus fuel stations not attached to a well-known name.

"The refiners are essentially pumping up the street price because they have a lock over the retail gasoline market. With the prices the weakest in the country, it can't be those laws. It has to be the pricing behavior," said Jamie Court of Consumer Watchdog, a non-profit advocacy group in Santa Monica.

Industry groups, including the West States Petroleum Association, say higher prices are due to state and federal taxes, as well as fees for cap and trade and low carbon fuel standards in California, which can tack on an extra 63 cents a gallon.

As of April 2015, refiners Valero Energy Corp (VLO.N), Phillips 66 (PSX.N), Chevron Corp (CVX.N), Tesoro Corp (TSO.N) and Royal Dutch Shell Plc (RDSa.L) controlled about 81 percent of California's retail gasoline market, according to state data.

Representatives for Tesoro and Chevron said there were a number of factors contributing to the price of gasoline in California, including taxes and local market conditions.

This year, higher prices drew the attention of California Attorney General Kamala Harris, who in May subpoenaed California refiners as part of a probe into whether they manipulated gasoline prices since 2014. A similar investigation in 2006 found no evidence of manipulation.


(Reporting by Liz Hampton and Jessica Resnick-Ault; Editing by Marguerita Choy)

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