Santa Monica, CA—California refinery shutdowns and slowdowns are boosting refinery profit margins by as much as 72 percent, according to a key indicator called “crack spreads,” Consumer Watchdog said today.
Crack spreads represent the price difference between what refineries pay per barrel of crude oil and what they charge for the products they make out of it. These spreads have skyrocketed with the spike in gasoline prices following refinery shutdowns. The spreads are an early indicator of a windfall for refineries.
“The increased profits are coming at the expense of California consumers who are missing out on the relatively low gas prices being enjoyed by the rest of the nation,” said Consumer Watchdog’s Cody Rosenfield. “Despite the suspicious timing of the closures and slowdowns, the state has not responded to calls from Consumer Watchdog demanding an investigation into the authenticity of refiners’ claims.”
Since the shutdown of the Tesoro Martinez refinery and damage from an explosion at Exxon’s Torrance refinery, refinery profits from the widening spreads for Kern River crude stand at $31 per barrel, according to Platts, an energy trade publication. Before the occurrences, refineries were making an $18 profit on the products made from a barrel of crude, according to Platts.
Prices at the pump in California have soared 60 cents since Tesoro began to shut their Martinez refinery in early February, bringing the price per gallon above $3.00 for the first time in 2015.
California’s gasoline market is controlled by a handful of big companies that retain a monopoly grip on California’s gasoline supply because they produce almost all of its supply in order to meet stricter environmental standards.
“They also keep only a 10-day supply of gasoline on hand, so any hiccup in refinery operations spooks markets and helps provide an opening for refineries to manipulate prices,” said Rosenfield. “The rest of the country keeps an average of a 24-day supply on hand, a standard California lawmakers should mandate refineries meet in California."
Wholesale spot prices in Los Angeles climbed another 14 cents last night, reaching $2.17 per gallon, a 50-cent increase since the Martinez shutdown began. Spot prices in Los Angeles hadn’t reached that height since November 12th of last year.
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