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California refinery breakdowns push petrol towards record highs

Pump prices in the state have gained 12 cents in the past week to average US$3.71 a gallon

Calgary

CALIFORNIA drivers are facing the prospect of paying US$4 a gallon at the pump for the first time in five years after its refineries were hit by a series of breakdowns.

Pump prices in the most populated US state have gained 12 cents in the past week to average US$3.71 a gallon, according to AAA. That's about three times the nationwide increase. In rural Mono county, near Yosemite National Park, prices are already above US$4 a gallon while in San Francisco, they have risen to US$3.86 and in Los Angeles, they are up to US$3.79.

"Motorists in California have been hit hard with surging petrol prices in the last month, but the situation is about to get worse," Patrick DeHaan, head of petroleum analysis at GasBuddy, a web-based pricing surveyor, said in a note. Petrol in the state is "on its way to likely hitting US$4 per gallon for the first time since July 27, 2014" in the next two weeks.

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Retail prices are surging after Valero Energy Corp's refinery in the Bay Area stopped oil processing after about a week of smoky emissions prompted air-quality warnings. In Southern California, a fire at the Phillips 66 refinery in Los Angeles was said to lead to the shut down of the crude processing unit and the ramping down of other units to minimal rates. The petrol-producing fluid catalytic cracker at Chevron Corp's El Segundo plant, the largest refinery in the state, has been down since Apr 1, according to Genscape Inc.

Golden State petrol currently costs more than any other state in the union, according to AAA. Even in Hawaii, normally the most expensive, prices were about 20 cents a gallon cheaper. California's unique clean-burning petrol blend that is only produced by local refineries and a handful of others around the world, as well as its lack of import pipelines, have made the state an energy island where refinery disruptions can cause wild swings in prices.

Compounding the refinery disruptions, the state is going through its switch to summer petrol from winter petrol, leaving the motor fuel stockpiles 17 per cent below year-earlier levels last week, according to California Energy Commission data. The price of ethanol, which is added to petrol, is also higher after flooding in the Midwest in recent weeks.

Retail prices tend to rise on the back of surging wholesale prices. California-blend petrol in Los Angeles gained 5.5 cents versus New York futures to a 49-cent a gallon premium Friday, the widest premium since December when another spate of refinery issues plagued the state, according to data compiled by Bloomberg. The premium in San Francisco widened six cents to 42 cents a gallon, the most since May 2017. BLOOMBERG