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December 2, 2022

West Coast gasoline prices have been volatile this year

weekly west coast regular reformulated retail gasoline prices
Data source: U.S. Energy Information Administration, Gasoline and Diesel Fuel Update

Regular retail gasoline prices on the West Coast had substantial price swings this year, especially in the fall. According to our Gasoline and Diesel Fuel Update, retail gasoline prices on the West Coast averaged $5.82 per gallon (gal) in June, then decreased to average $4.94/gal in August, before increasing to average $5.69/gal the week of October 3. By the week of November 28, 2022, West Coast gasoline prices had fallen to $4.59/gal. This year’s gasoline price volatility reflects how sensitive West Coast prices can be to relatively small changes in refinery output and import levels.

High retail gasoline price increases in the fall were specific to the West Coast. From September 19 to October 3, when prices on the West Coast rose by 84 cents per gallon, regular retail gasoline prices decreased on the East Coast and U.S. Gulf Coast, and they increased by 20 cents/gal in the Midwest.

Unique characteristics on the West Coast—particularly in California—influence the supply of gasoline and may cause the West Coast to be more susceptible to wide price swings. The West Coast is isolated by a lack of petroleum infrastructure connections to the rest of the United States. In addition, California state regulators require a different gasoline formulation than the rest of the country.

West Coast gasoline inventories in 2022 compared with the 2017-21 five-year average
Data source: U.S. Energy Information Administration, Weekly Petroleum Status Report

West Coast refineries generally must maintain steady production levels to ensure sufficient regional supply to meet demand. Refinery outages can disrupt this balance and place pressure on West Coast markets to meet demand by either drawing down local inventories or importing gasoline from refineries in Asia.

Since 2020, West Coast refinery capacity has decreased, which in turn may have also made West Coast gasoline prices more sensitive to supply changes. Notably, the Tesoro (Marathon) refinery in Martinez, California, switched from refining traditional petroleum-based fuels to renewable diesel. The conversion has reduced regional gasoline supply by 9%, or 161,000 barrels per day. This fall, given less refinery capacity and a combination of planned and unplanned refinery outages, the West Coast met demand with inventory draws. West Coast gasoline inventories, however, were low from the beginning of August into September, falling below the five-year (2017–21) average for those months.

The limited supply options associated with low inventories, less refining capacity, and few sources to obtain gasoline that meets state specifications may have caused West Coast gasoline prices to be more sensitive to refinery outages and changes in imports than normal. Relatively high gasoline prices in September and early October corresponded with a period of slightly less production by West Coast refineries and significantly reduced gasoline imports. Gasoline prices fell in mid-October when refinery runs increased slightly and imports increased from their lows in September. In November, refinery runs increased further, contributing to West Coast gasoline inventories increasing above the five-year average and the average retail gasoline price decreasing to its lowest since February 28, 2022.

Principal contributor: Jimmy Troderman