Why Are Gasoline Prices So High in the West Coast Region?

Gasoline prices in the West Coast region were at $2.45 per gallon on January 25, 2016. This is around $0.60 per gallon higher than the average US gasoline prices at $1.85 per gallon. The West Coast region’s gasoline prices were $0.45–0.85 per gallon more than the other regions.

The West Coast region uses different gasoline blends, like summer and winter gasoline blends, in order to reduce pollution. Due to its different types of gasoline blends, the West Coast region doesn’t rely on neighbor states if there are production interruptions. This could impact the supply and force the prices to rise. This happened in February 2015. ExxonMobil’s refinery outage caused supply shortages.

The gasoline tax in California is another reason for the price spike in the West Coast region. In California, gasoline consumers pay $0.59 in taxes per gallon of gasoline. This is more than 46 states. So, gasoline prices were higher in the West Coast region.

The refinery outage resulted in the supply shortage. However, it benefited refineries due to a rise in the prices. The refinery outage limited ExxonMobil’s refinery. It benefited from higher prices and gained more revenue.

Higher gasoline prices in the West Coast region mean more revenue for the refineries operating in West Coast region. The revenue rose for Alon USA’s Bakersfield Refinery (ALJ), Chevron’s El Segundo Refinery (CVX), Tesoro’s Carson Refinery (TSO), Phillips 66’s Los Angeles Refinery (PSX), and BP’s Cherry Point Refinery (BP).

Chevron accounts for 3.6% of the Equity Income Fund ETF (DHS).

In the next part of this series, we’ll discuss the updates on diesel prices.