June 19, 2024 - SACRAMENTO - Officials from the California Energy Commission (CEC) and Division of Petroleum Market Oversight (DPMO) recently heard an update about the potential for gasoline supplies to remain stable this summer. Gas prices in California have been on the decline for nine weeks straight, and prices are now lower than at this time last year.

CEC staff analysis reveals that there should be adequate supply for California gasoline if the refining sector plans ahead for the summer driving season. However, officials warn that if refineries go offline without plans for adequate resupply, inventories could drop and lead to price spikes. 

Some of the key takeaways of the June 6 workshop include:

• Reliable gasoline supply is a key factor behind gasoline prices. ​ 
• Planned maintenance, which refiners control in terms of timing and magnitude, reduce gasoline supplies and impact price volatility. It also makes the market more susceptible to opportunistic and potentially manipulative trading—which are issues that the California market encountered last year.​
• The increased concentration in the refining sector likely magnifies planned maintenance impacts. Just four refiners control 90 percent of the crude oil refining capacity in California. ​
• Responsible resupply plans are critical to mitigate the impacts of planned maintenance. ​ 

CEC Vice Chair Siva Gunda said there were reasons to feel a little bit more optimistic than going into 2022 or 2023.

“I really hope that our workshop has provided enough visibility to traders and the industry to pull together the necessary levers to increase the liquidity this summer and protect consumers,” Vice Chair Gunda said.

During the workshop, Jeremy Smith, a deputy director for the CEC’s Energy Assessments Division, provided an overview of gasoline supply and demand trends and the summer outlook. The projections, which are based on historical data, supports very cautious optimism for the summer months, he said.

New tools are providing greater transparency into maintenance schedules to help ensure adequate supply levels will be available. Smith cautioned that unplanned maintenance could lead to price increases and emphasized how CEC is working closely with refiners to monitor that and ensure liquidity in the market.

“The analysis reveals that there should be sufficient supply for California gasoline if the refining sector does its part to responsibly plan for the summer driving season,” said DPMO Director Tai Milder. “Gasoline production is solely in the hands of the refining industry and a repeat of the past price spikes could happen if refineries go offline irresponsibly or fail to maintain adequate backup inventory going into the late summer months.”

Last Year’s Price Spikes

During the workshop, Dr. Gigi Moreno, chief economist for DPMO, discussed how maintenance affects gasoline prices. 

Gasoline prices spiked last year — to as high as an average of $6.08 per gallon in September 2023 — in part because in-state refineries went offline for scheduled maintenance without a plan for backfilling supply. 

Elevated prices impacted consumers for 105 days, taking 70 days to reach its peak and 35 days to return to the trend. In September 2023, when demand was at its peak and supplies were tight, California refineries decreased supply by over 60 million gallons. CEC estimates that ​every 10 cent per day increase in gasoline prices burdened Californians at the pump an incremental $4 million per day, Dr. Moreno said.

The refining margin spiked as spot and retail prices jumped, indicating that refinery margins made up the largest proportion of the price spikes between July and September 2023. ​Retail margins spiked and persisted long after spot prices normalized, contributing to the overall price increase, she said.

How We Got Here

The CEC and DPMO organized the workshop to provide an overview of supply, demand, and price trends observed in data collected under Senate Bill X1-2, the California Gas Price Gouging and Transparency Law. Staff also presented new data analysis tools being used to think about trends for the high-demand summer months.

The workshop is part of the ongoing activities to implement the new law which enhances the state’s ability to understand and respond to gasoline price spikes and excessive prices faced by California consumers. Following price spikes at the pump in the Fall of 2022, Governor Gavin Newsom signed SB X1-2. 

The law provided the state with new tools needed to promote transparency in the oil industry, analyze gas price spikes and the excessive profits they produce, and help guide efforts to protect Californians at the pump. It includes transparency and oversight measures that increase accountability of the petroleum industry. 

The CEC is closely tracking gas prices, looking at the influence of several factors, including gasoline supply and refinery maintenance. The CEC’s Energy Assessments Division is taking the lead in implementing the data collection, reporting, and assessment activities under the law.  

DPMO is an independent division within the CEC that was created as part of SB X1-2. It is responsible for carrying out the activities in the law focused on market oversight and investigation.

Presentations and a recording of the workshop can be found on the CEC website. 

About the California Energy Commission
The California Energy Commission is the state's primary energy policy and planning agency. It has seven core responsibilities: advancing state energy policy, encouraging energy efficiency, certifying thermal power plants, investing in energy innovation, developing renewable energy, transforming transportation, and preparing for energy emergencies.
Source: California Energy Commission