The Feds’ final approval of the transfer of Shell’s Los Angeles refinery and 250 gas stations in Southern California creates the possibility that an upstart company with refining and distribution capacity could challenge Chevron and the other majors to do better.
The fact is that the Big Five have operated much like an oligopoly: working together to limit supply and drive up gas price rather than competing to sell more gasoline than their competitors. The latest symptoms in the West spring from a remarkable shut down of refining capacity which is driving prices as high as $4 per gallon in the Bay Area and sucking the life out of the economy.
What will Tesoro do with Shell’s resources?
It may not be big enough to create a price war by flooding the market with fuel, but it can increase inventories, including expanding its new refinery, and keep the market more competitive.
Maybe more importantly Tesoro is free to build its brand by innovating at its new gasoline stations. That means actually supplying E-85 and installing new temperature adjusted gasoline pumps that will dispense an honest gallon when the temperature rises. The hot fuel scandal, where gas expands when the heat rises but pumps don’t dispense an energy-appropriate gallon, is costing Californians $450 million per year.
Will Tesoro have the cajones to buck the big boys and go where no other oil company has gone? Stay tuned.
An angry public would reward such a move with big sales, but does Tesoro have the will now that Shell has given it the way?