Tuesday, March 2, 2010

Chilean Quake Spikes Gasoline Prices in California

Speculators are driving up gasoline prices in California, already the highest in the nation, in anticipation of West Coast refineries exporting large volumes of its supply to Chile in response to the massive earthquake there.

The Chilean national oil company ENAP reported losing two major refineries and left with 10 days of diesel in the wake of the 8.8 magnitude quake. Repairs will take months and will seek imports from California and other states to fill the void, the San Diego Union-Tribune quoted Bloomberg News and local industry sources.

Prices in the past week have risen to 7 cents to $2.999 in California and $3.038 in San Diego and Los Angeles, and expected to extend rising as refineries convert to meet the state's higher smog emission standards for the spring and summer months.

“It’s speculation,” said Brian Milne, refined-fuels editor for Telvent DTN, which provides information to businesses. “Of course, markets will move on news like that.”

California requires 30 different blends of gasoline to service the state depending on where the urban sources of vehicle carbon monoxide originate. Californians the past two years are driving less, keeping the demand down, but that trend will be offset as reserves are exported to Chile, according to analysts quoted in the story.


A long disruption in Chile’s production would have an effect here, even if Californians drive less, said Bob van der Valk, who tracks prices for 4Refuel, a supplier to fleets.

“California will be net short of fuel if everything starts moving away,” he said.

Two other factors are at play. The cost of crude oil now at $80/barrel is twice as high as last year at this time. Keeping that in check is the stronger U.S. dollar which tends to pull prices down.

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