While the price for gasoline this year has remained below $4 per gallon for most of the country, prices on the West Coast (PADD 5) have been holding above that level since late February. Since the national average price for regular gasoline peaked this year at $3.94 per gallon on April 2, prices across the country generally have been trending downward on the back of decreasing crude oil prices, with the national average falling to $3.71 per gallon on May 21. In contrast, the average West Coast retail gasoline price remained at $4.24 per gallon on May 21, only two cents below its 2012 peak from a week earlier (Figure 1). While refinery issues have hit the West Coast particularly hard over the past few months, the imminent return of BP's Cherry Point, Washington refinery should bring lower prices to gasoline consumers in the region.
Abnormally low refinery runs on the West Coast since February tightened local gasoline markets, causing both wholesale and retail gasoline prices to rise. The West Coast gasoline market began 2012 in uneventful fashion, with gross inputs into PADD 5 refineries tracking their typical level during January, then edging downward as refiners underwent planned seasonal maintenance. Instead of trending back upward from early February as typically happens as refineries come back online following maintenance, runs this year continued to move lower, following a late-February fire at BP's Cherry Point refinery in Washington and a string of unplanned outages at other plants. The Cherry Point plant is only now returning to service.
By mid-April, four-week average gross refinery inputs on the West Coast bottomed out at about 360,000 barrels per day (14 percent) below typical levels. Reduced refinery operations first put upward pressure on wholesale prices, which later translated into higher prices at the pump. Over the last five years, from March through May, retail prices in PADD 5 have typically averaged about 35 cents per gallon above those on the Gulf Coast (which provides a good baseline for comparison as the center of the U.S. refining industry). However, in 2012, West Coast prices over this period have averaged about 53 cents per gallon above the Gulf Coast, with that difference reaching as high as 75 cents per gallon on May 21.
While unplanned refinery outages generally cause retail product prices to rise, the West Coast market is especially sensitive to such shutdowns. That is because the West Coast market is relatively isolated. Given the West Coast's lack of significant pipeline connections to other markets and relative distance from the active physical trading markets in the Atlantic Basin, outages there tend to cause more severe market dislocations as the logistics involved in backfilling supplies can be difficult.