Between August 6 and August 13, the price of retail regular grade gasoline on the West Coast (PADD 5) increased 19 cents per gallon, well above the 8-cent-per-gallon increase for the United States as a whole. While rising global crude oil prices have pushed gasoline prices higher nationwide, an August 6 fire at Chevron's Richmond, California refinery placed added pressure on West Coast prices. After an initial increase of 32 cents per gallon on August 7, spot prices in Los Angeles for California-specification Reformulated Blendstock for Oxygenate Blending (CARBOB) have fallen 18 cents per gallon to $3.09 per gallon on August 21, a discount to similar prices in New York Harbor (Figure 1). Although press stories indicate that the crude distillation unit at the Richmond refinery is expected to remain offline for four to six months, reports that gasoline-producing units at the Richmond refinery will continue to run using gasoil feedstocks transported from other sources, along with news that other West Coast refineries were increasing gasoline production, appear to have mitigated its impact on wholesale gasoline prices. This situation contrasts with that following the earlier outage at BP's Cherry Point, Washington refinery, when CARBOB traded at a large premium to gasoline in New York Harbor for an extended interval.
The price response to both the Richmond and Cherry Point outages highlights the special sensitivity of the West Coast gasoline market to supply disruptions. Unlike other U.S. markets, which are interconnected by pipelines and river systems, the West Coast liquid fuels market is relatively isolated and largely supplied by in-region refinery production. Through May of this year, West Coast refinery production supplied 80 percent of the almost 1.5 million barrels per day (bbl/d) of gasoline consumed in the region (Figure 2). Additionally, while there are 23 refineries in PADD 5 (exclusive of Hawaii and Alaska), and 2.6 million bbl/d of operable refinery capacity, four large refineries, each with an operable capacity greater than 200,000 bbl/d, account for almost 40 percent of the region's total crude oil distillation capacity. Both the Richmond and Cherry Point refineries are in this group. Assuming a typical gasoline yield of about 50 percent, an outage at a 245,000-bbl/d refinery (the average size of the four biggest West Coast refineries) has the potential to remove more than 120,000 bbl/d of gasoline from the market. Given that the West Coast market depends heavily on in-region production, and given that a small number of large refineries contribute major shares of that production, a single unplanned refinery outage can have a dramatic impact on supply.