Transcript CEC-999-2005-023.ppt

2005 GASOLINE PRICE MOVEMENTS
IN CALIFORNIA
Joseph Desmond
Chairman
California Energy Commission
November 18, 2005
CALIFORNIA ENERGY COMMISSION
Presentation Topics
• Overview of recent events influencing gasoline prices
• Findings
• Decreased crude oil production and refinery closures in the
Gulf of Mexico
• Impacts to crude oil and gasoline prices
• Government agency responses, impacts and activities
• Options for state action
2
CALIFORNIA ENERGY COMMISSION
Overview
• Unprecedented retail gasoline price spikes occurred during
the late summer of 2005.
• The average California retail gasoline price increased by
29 cents in a single week in late August.
• Factors relating to price spikes in California include supply
shortfalls and market conditions following Hurricane
Katrina and Rita, increased exports, and refinery outages.
• Government agency responses and staff findings will be
presented to address price changes in California.
• This report focuses exclusively on gasoline price changes
in the state.
3
CALIFORNIA ENERGY COMMISSION
Events Affecting California Wholesale Gasoline Prices
(CARBOB Spot Prices)
September 1 - Jones Act is
waived, allowing foreign vessels
to transport petroleum products
between U.S. ports.
CARBOB Spot Price
300
September 2 - The IEA announces
that 60 million barrels of crude oil and
finished products will be available for
export to the U.S.
280
August 31 - U.S. EPA
fuel waiver is expanded
to cover the entire U.S.
Cents per Gallon
260
September 9 - CARB
announces it will permit
early transition to winter
blend gasoline.
September 28 - Large Northern
Californian refinery experiences a
problem with a major gasoline
producing unit.
October 17 - Gasoline and crude oil
prices experience significant
increases in NYMEX trading due in
part to concern of what impact
Hurricane Wilma will have.
August 24 - Tesoro's Golden Eagle
refinery experiences a fire in a major
gasoline producing unit.
240
220
October 24th - Hurricane
Wima makes landfall on
Florida's West Coast as a
Category 3 hurricane.
200
August 29 - Hurricane
Katrina makes landfall.
180
July 20 - Chevron's El Segundo
refinery experiences a fire at one of
its crude oil units.
160
September 12 - Power outage in
Los Angeles causes disruptions
at three refineries.
September 27 - U.S. EPA
extends fuel waiver through
October 24th.
September 24 - Hurricane
Rita makes landfall.
Note: CARBOB is California reformulated gasoline blendstock for oxygenated blending
11/8/05
11/4/05
10/31/05
10/27/05
10/23/05
10/19/05
10/15/05
10/11/05
10/7/05
10/3/05
9/29/05
9/25/05
9/21/05
9/17/05
9/13/05
9/9/05
9/5/05
9/1/05
8/28/05
8/24/05
8/20/05
8/16/05
8/12/05
8/8/05
8/4/05
7/31/05
7/27/05
7/23/05
7/19/05
7/15/05
140
Date
4
CALIFORNIA ENERGY COMMISSION
Findings
• California wholesale gasoline prices rose sharply with
New York Mercantile Exchange (NYMEX) market prices
following Hurricanes Katrina and Rita.
• California crude oil prices did not significantly impact the
retail price spike of gasoline in California during late
August and early September.
• Exports to Arizona and Nevada increased by 45% in the
four weeks following Hurricane Katrina.
• Temporary shortfalls of supply influenced gasoline prices
following the Hurricanes.
5
CALIFORNIA ENERGY COMMISSION
Findings
• Unplanned refinery outages affected markets in
late July, late August and mid September of 2005.
• Retail gasoline prices followed changes in
wholesale prices in the late summer of 2005.
• Swift governmental actions mitigated a prolonged
elevation of prices following the Hurricanes of
2005.
6
CALIFORNIA ENERGY COMMISSION
Crude Oil Production in the Gulf Coast
7
CALIFORNIA ENERGY COMMISSION
Crude Oil Production in the Gulf Coast
• 26% of the total U.S. crude oil production was initially curtailed
due to Hurricane Katrina
• Loss of production did not directly translate to the California
market.
• Alaska North Slope crude
oil prices (the benchmark
for California) remained
relatively flat in relation to
the retail cost of gasoline
in California.
8
CALIFORNIA ENERGY COMMISSION
Temporary Closure of Gulf Coast Refineries
9
CALIFORNIA ENERGY COMMISSION
Temporary Closure of Gulf Coast Refineries
• About 28% of total U.S. refining capacity was either offline or operating at reduced rates following Hurricane
Katrina.
• Destruction from Hurricane Rita initially resulted in the
temporary closure of about 30% of U.S. refining capacity.
• As of November 9, about 5% of U.S. refining capacity
remains off-line.
• Midwest pipeline closures resulted in Midwest supply
shortfalls.
10
CALIFORNIA ENERGY COMMISSION
Crude Oil and Wholesale Gasoline Prices
Daily California Average CARBOB Spot Price vs. Alaska North Slope Crude Oil Price
July 1 - November 10, 2005
300
ANS Crude Price
280
CARBOB Average Wholesale Price
260
220
200
180
160
140
120
11/4/05
10/28/05
10/21/05
10/14/05
10/7/05
9/30/05
9/23/05
9/16/05
9/9/05
9/2/05
8/26/05
8/19/05
8/12/05
8/5/05
7/29/05
7/22/05
7/15/05
7/8/05
100
7/1/05
Cents per Gallon
240
Date
11
CALIFORNIA ENERGY COMMISSION
NYMEX Futures Prices and the Link to the
California Market
Gasoline Spot & Futures Prices (LA and the NYMEX)
July 1 to November 8, 2005
320
300
California Spot
Price Peaks In
Line With NYMEX
Los Angeles
NYMEX
280
260
220
200
180
160
Katrina Strikes
Louisiana
140
120
11/8/05
11/3/05
10/29/05
10/24/05
10/19/05
10/14/05
10/9/05
10/4/05
9/29/05
9/24/05
9/19/05
9/14/05
9/9/05
9/4/05
8/30/05
8/25/05
8/20/05
8/15/05
8/10/05
8/5/05
7/31/05
7/26/05
7/21/05
7/16/05
7/11/05
7/6/05
100
7/1/05
Cents per Gallon
240
Date
12
CALIFORNIA ENERGY COMMISSION
Branded and Unbranded Wholesale Gasoline
Prices
CARBOB Branded and Unbranded Rack Prices
July 1 - November 11, 2005
290
Branded
Unbranded
270
230
210
190
170
11/11/05
11/4/05
10/28/05
10/21/05
10/14/05
10/7/05
9/30/05
9/23/05
9/16/05
9/9/05
9/2/05
8/26/05
8/19/05
8/12/05
8/5/05
7/29/05
7/22/05
7/15/05
7/8/05
150
7/1/05
Cents per Gallon
250
Date
13
CALIFORNIA ENERGY COMMISSION
Retail and Dealer Tank Wagon Prices
California Gasoline Price Comparison
Retail & Dealer Tank Wagon
July 4, 2005 to October 24, 2005
320
310
Retail
300
DTW
290
270
260
250
240
230
220
210
200
10/24/05
10/17/05
10/10/05
10/3/05
9/26/05
9/19/05
9/12/05
9/5/05
8/29/05
8/22/05
8/15/05
8/8/05
8/1/05
7/25/05
7/18/05
7/11/05
190
7/4/05
Cents Per Gallon
280
Date
Note: November DTW data not yet available
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CALIFORNIA ENERGY COMMISSION
Retail Gasoline Prices
U.S. vs California Retail Gasoline Prices
July 1, 2005 - November 14, 2005
320
California
310
United States
300
280
270
260
250
240
230
220
210
11/4/05
10/28/05
10/21/05
10/14/05
10/7/05
9/30/05
9/23/05
9/16/05
9/9/05
9/2/05
8/26/05
8/19/05
8/12/05
8/5/05
7/29/05
7/22/05
7/15/05
7/8/05
200
7/1/05
Cents per Gallon
290
Date
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CALIFORNIA ENERGY COMMISSION
Gasoline Price Components
• California uses Alaska North Slope spot prices as a benchmark for
crude oil price.
• Apparent refiner cost and profit margins include but are not limited to:
– refiner profit and
– costs of :
•
•
•
•
•
•
•
•
refining and terminal operation
crude oil processing
oxygenate additives
product shipment and storage
oil spill fees
depreciation
purchases of gasoline to cover refinery shortages
brand advertising
• Energy Commission calculates aggregated apparent refiner margins
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CALIFORNIA ENERGY COMMISSION
Gasoline Price Components
•
Taxes
– Excise tax: Federal 18.4%, California 18%
– Sales tax: 7.25% state tax, 0 to 1.5% local tax
•
Apparent dealers cost and profit margins include but are not limited to:
– dealer profit and
– costs of:
•
•
•
•
utilities, supplies, equipment maintenance, rents, wages
environmental fees, licenses, permitting fees, credit card fees, insurance, franchise fees
depreciation
advertising
•
Data sources: Wall Street Journal for ANS, Oil Price Information Service for
wholesale gasoline prices and the Energy Information Service for retail
gasoline prices.
•
Energy Commission calculates aggregated apparent dealer margins.
•
Details can be found at http://www.energy.ca.gov/gasoline/margins/index.html
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CALIFORNIA ENERGY COMMISSION
Gasoline Price Components
2005 Gasoline Price Margins
$2.99
$3.250
$3.000
$2.55
$2.750
$2.30
$2.500
$1.97
$2.36
$2.52
$2.68
$2.12
$2.000
$1.750
$1.500
$1.250
$1.000
$0.750
January February
March
May
April
June
July
August
September October
$0.500
$0.250
Crude Oil Cost
Federal Excise Tax
Apparent Refinery Cost and Profit Margin
State Excise Tax
State and Local Sales Tax
Apparent Dealers Cost and Profit Margin
Unbranded
Branded
Unbranded
Branded
Unbranded
Branded
Unbranded
Branded
Unbranded
Branded
Unbranded
Branded
Unbranded
Branded
Unbranded
Branded
Unbranded
Branded
Unbranded
$0.000
-$0.250
Branded
Price per Gallon $
$2.250
$2.48
$2.88
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CALIFORNIA ENERGY COMMISSION
US and International Agency Responses
• International Energy Agency released nearly 60 million
barrels of petroleum from their 26 member countries.
– 39 million barrels of crude oil
– 11 million barrels of gasoline
– 10 million barrels of distillates
• The Bush Administration released crude oil from the
Strategic Petroleum Reserve and waived the Jones Act
rules which limit marine traffic between U.S. ports to U.S.
flagged ships.
• U.S. EPA waived certain fuel specifications to quickly
expand the availability of gasoline and diesel fuel.
19
CALIFORNIA ENERGY COMMISSION
California Government Responses
• Air Resources Board secured regulatory approval for early transition to
winter gasoline blending.
• Energy Commission provided accurate real-time information and
analysis to the Governor’s Office, Legislature and consumers.
• Energy Commission created a new web page to provide accurate
timely information and energy saving tips to the public.
www.energy.ca.gov/consumerfuels/index.html
• Energy Commission worked with the Attorney General's Office to
develop an online complaint form for consumers concerned with
gasoline price gouging.
• Energy Commission added fuel savings tips for consumers on the state
Web site: “Flex your power at the pump.”
• This report was initiated in a press conference on September 2, 2005.
20
CALIFORNIA ENERGY COMMISSION
Options for State Action
• Short-term actions:
– Streamline permitting for petroleum infrastructure projects.
– Revise law for the Energy Commission to collect detailed data on product
movements, sales volumes and prices, and retail data collection.
– Establish a public goods charge on refinery products for research and
activities to reduce dependence on petroleum fuels.
– Coordinate with West Coast states’ energy representatives on emergency
planning and responses.
– Increase use of contract fuel purchases for public agencies, private fleets,
and consumers to reduce the impact of fuel price spikes.
– Expand outreach and public information programs.
– Develop a dynamic system model to rapidly evaluate socio-economic
impacts of changes in the transportation fuel sector.
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CALIFORNIA ENERGY COMMISSION
Options for State Action
• Long-term actions:
– The Energy Commission should secure funding to support
transportation-related work at the Energy Commission.
– The Energy Commission should secure funding for research into
alternative fuels, alternative fuel vehicles, increasing fuel economy,
and implementing of petroleum reduction strategies.
– The Energy Commission should perform a comprehensive
economic analysis on the relationship between California
wholesale prices and the NYMEX.
– The Energy Commission should conduct a more comprehensive
study of retail pricing.
– The state should implement the recommendations in the 2003 and
the upcoming 2005 Energy Report recommending a “best
practices” siting process for refinery and infrastructure expansions.
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CALIFORNIA ENERGY COMMISSION
Options for State Action
• Long-term actions:
– The Energy Commission should support opportunities to expand
pipeline infrastructure to increase the capacity to transport
petroleum product within the state.
– The Energy Commission should investigate increasing the use of
contract fuel purchases for public agencies, private fleets, and
consumers to reduce the impact of fuel price spikes.
– The Energy Commission should develop a dynamic system model
to better quantify how multiple events, such as those described in
this report affect the consumers, business, and the California
economy.
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CALIFORNIA ENERGY COMMISSION
Notes - Crude Oil and Wholesale Prices
• Crude oil price remained relatively flat during the price
spike following Hurricane Katrina.
• Wholesale prices, however, rose by 64 cents during the last
week of August.
• Refiner margins peaked to all time high of following
Hurricane Katrina due to elevated wholesale prices and
relatively flat crude oil spot prices.
• Refiner production and inventory levels do not indicate a
significant cause of elevated wholesale prices.
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CALIFORNIA ENERGY COMMISSION
Notes - NYMEX Futures Prices and the Link
to the California Market
• Wholesale gasoline purchases are typically contracted for
delivery at a future date based on a futures exchange price
from the NYMEX.
• Large increases in NYMEX futures prices are often due to
a real or perceived scarcity of product.
• NYMEX futures prices spiked following Hurricanes
Katrina and Rita.
• The price of wholesale (25,000-barrel minimum)
transportation fuels purchases (spot pipeline prices) spiked
with NYMEX futures prices following the hurricanes.
25
CALIFORNIA ENERGY COMMISSION
Notes - Branded and Unbranded Wholesale
Gasoline Prices
• California has a large number of “vertically integrated
firms” that control oil production, refining, and distribution
of transportation fuels. These companies supply the
majority of gasoline to branded stations.
• High volume independent retailers rely on unbranded
wholesale purchases to provide discounted gasoline.
• Following Hurricane Katrina, unbranded wholesale
gasoline prices rose significantly above the branded
wholesale prices.
• Wholesale prices of gasoline delivered to retail stations
(dealer tank wagon prices) show a strong correlation with
retail prices following Hurricane Katrina.
26
CALIFORNIA ENERGY COMMISSION
Notes - Retail Gasoline Prices
• California retail prices peaked with U.S. retail prices
following Hurricane Katrina.
• U.S. prices had more volatility than California prices due
to the greater impact of the hurricanes in other regions.
• California retail prices have not declined as rapidly as
those of the U.S.
• U.S. and California differentials have stabilized back to
pre-Katrina levels.
27
CALIFORNIA ENERGY COMMISSION