West Coast motorists are paying 46 cents per gallon more for their gasoline for no apparent reason. Crude prices are less than same time last year. A Texas refinery is down, but California doesn’t its fuel from Texas. California has a greener formulation for its gasoline that is always the industry scapegoat, but Washington State doesn’t and prices there are spiking in unison with the golden state.
The Californian gouging is a result of tight inventories in the biggest, cash-richest market in the country. Keeping the market running on empty is a formula for high prices when there’s even the slightest shock to the system. Like a refinery down in Texas that causes California refiners to make a little more Arizona gasoline.
The proof of the profiteering is straight out of BP’s February report on 2006 profits. The report showed that the oil industry’s profit margins from West Coast refineries are about twice the global average, meaning the industry reaps disproportionate profits from Californians and other motorists in the region. BP reports refining margins as "Global Indicator Refining Margins," on the basis of industrywide reports.
BP’s indicators showed a global 4th quarter refining margin of $6.30 a barrel, but $14.59 a barrel on the U.S. West Coast. The comparable figure for the year was $8.39 globally and $14.84 on the West Coast, encompassing California, Washington, Oregon, Nevada, Arizona, Hawaii and Alaska. Not all refiners break out refining margins as clearly as BP, so BP’s report may be the most understandable indirect indicator of the refining profits of the rest of the oil industry. The indicator figure does not state actual refining profits, which some industry analysts put much higher.
BP is the third-largest refiner in California and among the largest in the West, with major refineries in Southern California and Washington State. It owns and licenses Arco-branded stations in California and elsewhere in the West.
Once again, not much incentive to BP to move Beyond Petroleum when it can keep inventories in the West so low that its refining profits can go so high.