The regular price of gasoline in California is $4.668 where as some stations were charging $5.89. Air resource board has granted permission to oil refineries to make winter blend gasoline but they are not allowed to sell it. This composition of gasoline allows oil refineries to produce greater quantity of winter blend gasoline. In the state of California, oil refineries are separated from rest of the city. Pipelines in California are cut off from the rest of the oil pipelines that are spread in other areas.
Prices began to rise after Exxon Mobil Corp. reduced its production owing to power failure. Sources further reported that gasoline prices in California are at their highest level and are not affordable for both consumers and the major businesses. Its cost is assumed to be unacceptably high. This condition forced Air Resource Board to take immediate actions and start producing winter-blend gasoline as soon as possible. It is an estimate that this decision will increase gasoline supply by only 8 to 10 percent. In addition, this increase in supply will also have slight effect on the quality.
Senior vice president at Dellas, John R. Auers said that this policy might continue if it helps oil refineries in some way or the other. In California, refinery and petroleum industry is running on knife’s edge. This indicates that if supply increases because of waiver and restored production, there are fewer chances that prices will fall. Oil refineries hold gasoline and wait for the time when the prices of oil gasoline are highest in the market. Tesoro Corp. also stopped selling gasoline to south California last week without any binding contract. Company runs near Los Angeles to bring in additional supplies.
Another company, Valero Energy Corp. (VLO) also halted production and stopped supplying gasoline to customers and businesses in California without any notification. Valero took several steps to supply gasoline to its branded and non-branded customers with a view to fulfill its commitments. Both branded and unbranded customers have their contracts with oil refiners. Branded customers sell products under the name of the company and purchase gasoline mixed with additives. However, unbranded customers also have their contracts with oil refiners but they are not bound to use the name. One of the spokesperson of the Phillips said that they have taken additional steps to make sure that fuel is being supplied to all kinds of customers without any stoppage.