CALIFORNIA DIESEL RETAIL PRICES BY REGION · Diesel Retail Prices by Region California Refinery...

• Phillips 66 Wilmington: On July 21, a mechanical failure caused flaring and black smoke at the refinery, according to the South Coast Air Quality Management District (South Coast AQMD) and the Los Angeles Times (LA Times).

• Marathon Martinez: On August 3, the company announced that it will indefinitely idle its Martinez refinery, converting it into a terminal facility, according to a statement posted on the company website (Marathon Petroleum).

Gasoline Retail Prices by Brand

Diesel Retail Prices by Region

California Refinery Profile

Properties of U.S. Crudes

Foreign Imports to California

Sulfur Content of Crude Imports

API Gravity of Crude Imports

California Gasoline Production

California Diesel Production

Featured Topic: Indefinite Idling of Marathon Martinez Refinery

July 2020 vs. 2019

(Percentage Change)

Northern CA 18% lower

Central CA 20% lower

Southern CA 18% lower

July 2020 Averages

Northern CA $3.26

Central CA $3.08

Southern CA $3.16

July 2020 vs. 2019

(Percentage Change)

76 17% lower

ARCO 16% lower

Chevron 15% lower

Hypermart 17% lower

Shell 16% lower

Unbranded 16% lower

Valero 16% lower

July 2020 Averages

76 $3.18

ARCO $2.94

Chevron $3.30

Hypermart $2.85

Shell $3.25

Unbranded $3.02

Valero $3.11

August

CALIFORNIA ENERGY COMMISSION

PETROLEUM WATCH

2020

REFINERY NEWSINSIDE

CALIFORNIA DIESEL RETAIL PRICES BY REGION

FEATURED TOPIC

CALIFORNIA GASOLINE RETAIL PRICES BY BRAND

$2.60

$2.80

$3.00

$3.20

$3.40

$3.60

$3.80

$4.00

$4.20

$4.40

Aug-

19

Sep-

19

Oct

-19

Nov

-19

Dec

-19

Jan-

20

Feb-

20

Mar

-20

Apr-2

0

May

-20

Jun-

20

Jul-2

0

Aug-

20

Dol

lars

per

Gal

lon

(Nom

inal

)

Northern Central Southern

$2.00$2.20$2.40$2.60$2.80$3.00$3.20$3.40$3.60$3.80$4.00$4.20$4.40$4.60

Aug-

19

Sep-

19

Oct

-19

Nov

-19

Dec

-19

Jan-

20

Feb-

20

Mar

-20

Apr-2

0

May

-20

Jun-

20

Jul-2

0

Aug-

20

Dol

lars

per

Gal

lon

(Nom

inal

)

76 ARCO CHEVRONHYPERMART SHELL UNBRANDEDVALERO

Source: CEC analysis of OPIS data

INDEFINITE IDLING OF MARATHON MARTINEZ REFINERYOn August 3, Marathon Petroleum Company announced that it will indefinitely idle its refinery in Martinez in October 2020. Marathon already ramped down operations at the refinery on April 27 due to decline in demand caused by Coronavirus Disease 2019 (COVID-19). Marathon plans to use the facility’s crude and product storage capacity for supplying other refiners in the area, effectively turning the location into a storage terminal until other operations are approved. California Energy Commission (CEC) staff have researched and prepared an initial analysis of refinery capacity, crude oil inputs, and production to see how much California’s refinery industry might change absent Marathon Martinez’s operations.

Although this analysis assumes other refineries continue operating as before, the state's collective refining activity will adjust to a different supply/demand balance. This will alter crude oil sourcing patterns and refinery fuel production strategies.

IMPACTS ON REFINERY UTILIZATION

The indefinite closing of Marathon Martinez directly impacts the state’s refining capabilities since it reduces California’s total crude refining capacity by 166,000 barrels per day (bpd), or roughly 9 percent of the California total. California Refinery Utilization shows refinery utilization in California from 2019-to-present with and without the Marathon Martinez refinery. This analysis assumes that no other refineries shut down and that operations stay identical to 2019. The calculation for utilization rates is the weekly sum of crude inputs for all reporting refineries divided by the total atmospheric distillation capacity (available on the CEC website). The “California less Marathon Martinez” line approximates what utilization rates would be by removing the Marathon Martinez capacity and crude inputs. Assuming other refineries do not decrease their crude inputs or capacity and product demand stays the same, this closure leads to an overall bump in utilization rates.

Marathon Martinez planned to start idling on April 27 and ramped down to zero percent utilization by May 8 according to a weekly report to the CEC. Before the idling, Martinez had a 4-week average utilization rate of 62 percent. In April, the total state utilization dropped below 60 percent, more than 25 percent lower than the 87 percent weekly average in 2019. Refineries usually operate near full capacity or somewhere between 80 to 90 percent in order to maximize efficiency. Transportation fuel demand picks up in the summer, resulting in higher utilization rates (rates rose above the 2019 average between June 2019 and September 2019). The seasonal trend continued this year as refineries ran more crude leading into June, but rates remained below 70 percent.

The May 2020 Petroleum Watch explored refinery profiles at the state level by using radar graphs to show how much they relied on certain processes. California Refinery Profile shows California, Northern California and Marathon Martinez refinery downstream profile, before and after indefinite idling. This analysis uses annual downstream capacities from the Energy Information Administration (EIA) and assumes that no other refiner changed refinery operations from 2019. The Marathon Martinez refinery itself resembles the overall shape of the state’s profile, relying primarily on vacuum distillation, hydro/catalytic cracking, and the desulphurization processes. Its removal from California’s total pool mainly affects California’s vacuum distillation and reforming/polymerization capacities by -3 percent and 1 percent, respectively.

The effect is more evident in Northern California since Marathon Martinez was a significant producer for the region. Taking out Martinez from the Northern California refinery

profile contracts the area, with reductions in vacuum distillation (-6 percent), thermal cracking (-2 percent), and heavy stream desulphurization (-2 percent). Product desulphurization would increase by 4 percent along with reforming/polymerization by 3 percent.

California’s refineries rely less on sorting units and more on product cleaning and rearranging. The change in capacities and refining process reliance could potentially affect the movements of crude oil and finished products. It also impacts foreign crude oil imports into California (and possibly domestic) since refineries purchase the type of crude oil most suited for their setup. Marathon Martinez’s configuration is most efficient when processing heavy and high sulfur crude oils, sourcing primarily from Ecuador, Saudi Arabia, and California.

IMPACTS ON CRUDE OIL IMPORTS AND INPUTS

California can expect a change in the pattern of imported crude oil with the closure of Marathon Martinez refinery. CEC staff analysis made assumptions based on past data to give a starting point on offering possible results that Marathon’s idle plans will have. CEC staff analyzed the 2019 statewide data from the EIA, removing Marathon Martinez to see its effects on imported crude oil. This analysis assumes that most refiners already have an optimized crude oil slate, and that they will maintain their import preferences from 2019.

While Marathon Martinez is only one refinery in the California petroleum market, its shutdown is significant enough to make a noticeable shift in California’s overall crude oil profile. API Gravity and Sulfur Content of U.S. Crudes displays the weighted average of all crude oil inputs into California refineries in 2019, as well as crude oil inputs from the Petroleum Administration for Defense Districts (PADD) for comparison. Removing Marathon Martinez crude inputs results in a shift to a slightly lighter API gravity, 26.1 degrees to 26.2 degrees, and higher sulfur content going from 1.7 percent to 1.8 percent.

These changes in overall crude oil properties are tied to the foreign sourced crude oils that most California refineries import. California acquires most of its foreign crude oil from Saudi Arabia, Ecuador, and Iraq. Share of Foreign Imports to California shows the most noticeable change is the drop in crude oil from Ecuador. Ecuador’s share of total imports drops from 18 percent to 14 percent. Saudi Arabia and Iraq increase their share of imports from 2 percent and 3 percent respectively. These are mostly sour crude oils, containing roughly 0.5 percent sulfur or greater.

Sulfur Content of California Crude Imports shows how California’s imported crude profile changes in 2019 when Marathon Martinez refinery is removed. There is a large drop of crude oils with sulfur levels at 1.6 percent from 7 percent down to 4 percent when Marathon Martinez is removed. This matches with the country data as Ecuador’s main grade of crude oil, Oriente, is marketed as being in the 1.4 to 1.6 percent sulfur content range. Without Marathon Martinez, the share of crude oil with sulfur levels above 2 percent increases from 48 percent to 54 percent.

Source: California Energy Commission (CEC) analysis of Oil Price Information Service (OPIS) data

Gavin Newsom Governor

David Hochschild Chair

Janea A. Scott, J.D Vice Chair

Karen Douglas, J.D. J. Andrew McAllister, Ph.D. Patty Monahan Commissioners

Drew Bohan Executive Director

CALIFORNIA

ENERGY

COMMISSION

FOR MORE INFORMATION California's Petroleum Market Weekly Fuels Watch Subscribe

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CALIFORNIA REFINERY PROFILE

Source: CEC analysis of CEC and U.S. Energy Information Administration (EIA) data

The changes in API Gravity of California Crude Imports shows the density of crude oil becoming slightly more diverse. Crude oils with an API gravity of 24 degrees had 19 percent of the share. This drops to 15 percent share of imported crude oils without Marathon Martinez. No other single API category noticeably increases its market share. Instead, it appears to be more evenly distributed across all API gravity levels with crude oils below 20 API gravity increasing its share by 2 percent and crude oils with an API gravity greater than 30 degrees increasing by 3 percent.

IMPACTS ON STATEWIDE PRODUCTION

Production analysis was done through calculation of Marathon Martinez’s 2019 production share by product and subtracting that from California 2019 production by product. Because the refinery does not produce jet fuel, this analysis only looks at gasoline and diesel and assumes gasoline and diesel production at other refineries are similar to 2019 rates. Gasoline and diesel inventory levels are not projected. It assumes that Marathon Martinez’s closure will not significantly impact California’s finished product inventories.

California Gasoline Production shows California Air Resources Board (CARB) gasoline production from 2019 to present before and after the removal of Marathon Martinez production. The 2019 average illustrates what levels looked like before the production cuts resulting from COVID-19. Removing the refinery from the 2019 California average resulted in an average of roughly 560 thousand barrels less per week of CARB gasoline production, or 8.7 percent of total California production in 2019. California Diesel Production shows CARB and Environmental Protection Agency (EPA) diesel production from 2019 to present also show the impact of the Marathon Martinez refinery. Removing Martinez’s diesel production meant an average of 355 thousand barrels less per week or 14 percent of California production in 2019.

In both figures, there is a downward shift of the high-low five-year ranges after removing Martinez’s production share. This high-low range shows maximum and minimum values for that week over the past five years. The five-year ranges have been extended to December 2020 to estimate what production could look like assuming production returns to levels seen in 2019. In California Gasoline Production, the average range from January 2019 to December 2020 is a low of 6,230 thousand barrels per week and a high of 7,220 thousand barrels per week. Removing Marathon Martinez shifts the average range to a low of 5,700 thousand barrels per week and a high of 6,600 thousand barrels per week. California Diesel Production average range from January 2019 to December 2020 is a low of 2,280 thousand barrels per week and a high of 2,810 thousand barrels per week. The removal of Marathon Martinez shifts the average range to a low of 1,950 thousand barrels per week and a high of 2,410 thousand barrels per week. The idling of Marathon Martinez will have a greater impact on the production of diesel compared to gasoline because Martinez makes up 14 percent of California’s diesel production as opposed to 8.7 percent of California’s gasoline production.

VacuumDistillation

Hydro/CatalyticCracking

Reforming/Polymerization

Product Desulphurization

Northern California Less Marathon Martinez

ThermalCracking

HeavyStream

Desulphurization

20%

0%

40%

60%

80%

VacuumDistillation



Product Desulphurization

Northern California

HeavyStream

DesulphurizationThermalCracking

20%

0%

40%

60%

80%

VacuumDistillation



ProductDesulphurization

Marathon Martinez

HeavyStream


20%

0%

40%

60%

80%

VacuumDistillation




Southern California

HeavyStream


20%

0%

40%

60%

80%Vacuum

Distillation




California

HeavyStream


20%

0%

40%

60%

80%

VacuumDistillation




California Less Marathon Martinez

HeavyStream


20%

0%

40%

60%

80%

API GRAVITY & SULFUR CONTENT OF U.S. CRUDES

Notes: Gasoline production only includes California Air Resources Board (CARB) gasoline. Ethanol is included in production numbers.

Source: CEC analysis of CEC and EIA data

PADD 1

PADD 2

PADD 3

PADD 4PADD 5

(Includes CA)

California

CA less Marathon Martinez

0.00

0.50

1.00

1.50

2.00

2.50

20 25 30 35 40

Sulfu

r Con

tent

(%)

API GravityHeavy Light

Sour

Sweet

50%

60%

70%

80%

90%

100%

Jan-

19

Feb-

19

Mar

-19

Apr-1

9

May

-19

Jun-

19

Jul-1

9

Aug-

19

Sep-

19

Oct

-19

Nov

-19

Dec

-19

Jan-

20

Feb-

20

Mar

-20

Apr-2

0

May

-20

Jun-

20

Jul-2

0

Wee

kly

Ref

iner

y U

tiliz

atio

n

California California less Marathon Martinez 2019 Weekly Average

April 17: Marathon announces plans to idle Martinez refinery

CALIFORNIA REFINERY UTILIZATION


SHARE OF FOREIGN IMPORTS TO CALIFORNIA

0%

5%

10%

15%

20%

25%

30%

ANG

OLA

ARG

ENTI

NA

BRAZ

IL

BRU

NEI

CAN

ADA

CO

LOM

BIA

ECU

ADO

R

EQU

ATO

RIA

L G

UIN

EA

GH

ANA

IRAQ

KUW

AIT

MEX

ICO

NIG

ERIA

PER

U

RU

SSIA

SAU

DI A

RAB

IA

TRIN

IDAD

AN

D T

OBA

GO

UN

ITED

AR

ABEM

IRAT

ES

VEN

EZU

ELA

CA CA less Marathon Martinez

SULFUR CONTENT OF CALIFORNIA CRUDE IMPORTS



CALIFORNIA GASOLINE PRODUCTION

CALIFORNIA

3000

4000

5000

6000

7000

8000

9000

Jan-

19Fe

b-19

Mar

-19

Apr-1

9M

ay-1

9Ju

n-19

Jul-1

9Au

g-19

Sep-

19O

ct-1

9N

ov-1

9D

ec-1

9Ja

n-20

Feb-

20M

ar-2

0Ap

r-20

May

-20

Jun-

20Ju

l-20

Aug-

20Se

p-20

Oct

-20

Nov

-20

Dec

-20

Thou

sand

s of

Bar

rels

Per

Wee

k

CARB Gasoline Production2019 Average

3000

4000

5000

6000

7000

8000

9000

Jan-

19Fe

b-19

Mar

-19

Apr-1

9M

ay-1

9Ju

n-19

Jul-1

9Au

g-19

Sep-

19O

ct-1

9N

ov-1

9D

ec-1

9Ja

n-20

Feb-

20M

ar-2

0Ap

r-20

May

-20

Jun-

20Ju

l-20

Aug-

20Se

p-20

Oct

-20

Nov

-20

Dec

-20

CARB Gasoline Production (less Marathon Martinez)

2019 Average

CALIFORNIA DIESEL PRODUCTION

CALIFORNIA LESS MARATHON MARTINEZ

CALIFORNIA CALIFORNIA LESS MARATHON MARTINEZ

1000

1500

2000

2500

3000

3500

4000

Jan-

19Fe

b-19

Mar

-19

Apr-1

9M

ay-1

9Ju

n-19

Jul-1

9Au

g-19

Sep-

19O

ct-1

9N

ov-1

9D

ec-1

9Ja

n-20

Feb-

20M

ar-2

0Ap

r-20

May

-20

Jun-

20Ju

l-20

Aug-

20Se

p-20

Oct

-20

Nov

-20

Dec

-20

Thou

sand

s of

Bar

rels

Per

Wee

k

CARB & EPA Diesel Production

2019 Average

1000

1500

2000

2500

3000

3500

4000

Jan-

19Fe

b-19

Mar

-19

Apr-1

9M

ay-1

9Ju

n-19

Jul-1

9Au

g-19

Sep-

19O

ct-1

9N

ov-1

9D

ec-1

9Ja

n-20

Feb-

20M

ar-2

0Ap

r-20

May

-20

Jun-

20Ju

l-20

Aug-

20Se

p-20

Oct

-20

Nov

-20

Dec

-20

CARB & EPA Diesel Production (less MarathonMartinez)2019 Average

Notes: Diesel Production only includes California Air Resources Board (CARB) Diesel and Environmental Protection Agency (EPA) Diesel.



API GRAVITY OF CALIFORNIA CRUDE IMPORTS


0%1%2%3%4%5%6%7%8%9%

10%11%12%13%14%15%16%17%18%19%20%

≤ 1

5.0

20.0

25.0

30.0

35.0

40.0

45.0

API Gravity

0%1%2%3%4%5%6%7%8%9%

10%11%12%13%14%15%16%17%18%19%20%

≤ 1

5.0

20.0

25.0

30.0

35.0

40.0

45.0

API Gravity

0%1%2%3%4%5%6%7%8%9%

10%11%12%13%14%15%

≤ 0

.1 1.1

2.1

3.1

4.1

Sulfur Percentage by Weight

0%1%2%3%4%5%6%7%8%9%

10%11%12%13%14%15%

≤ 0

.1 1.1

2.1

3.1

4.1

Sulfur Percentage by Weight


Notes: American Petroleum Institute (API)


https://xappprod.aqmd.gov/fens/Public/FacilityAllEvents?facilityId=171107https://www.latimes.com/california/story/2020-07-21/flaring-at-wilmington-refinery-caused-by-mechanical-failurehttps://ir.marathonpetroleum.com/investor/news-releases/news-details/2020/Marathon-Petroleum-Corp.-Reports-Second-Quarter-2020-Results/default.aspxhttps://oilprice.com/Latest-Energy-News/World-News/Marathon-Petroleum-To-Idle-Two-Refineries-Indefinitely.htmlhttps://oilprice.com/Latest-Energy-News/World-News/Marathon-Petroleum-To-Idle-Two-Refineries-Indefinitely.htmlhttps://www.energy.ca.gov/data-reports/energy-almanac/californias-petroleum-market/californias-oil-refinerieshttps://www.reuters.com/article/us-refinery-operations-marathon-pete-mar/marathon-says-it-will-idle-166000-barrel-per-day-martinez-california-refinery-idUSKBN21Z2GJhttps://www.energy.ca.gov/sites/default/files/2020-05/2020-05_Petroleum_Watch.pdfhttps://www.eia.gov/dnav/pet/pet_pnp_capchg_dcu_SCA_a.htmhttps://www.energy.ca.gov/data-reports/energy-almanac/californias-petroleum-markethttps://ww2.energy.ca.gov/almanac/petroleum_data/fuels_watch/index_cms.htmlhttps://www.energy.ca.gov/data-reports/reports/petroleum-watchhttps://twitter.com/calenergy/https://www.linkedin.com/company/california-energy-commission/https://www.instagram.com/calenergy/https://www.facebook.com/CAEnergy/https://www.youtube.com/user/CalEnergyCommissionhttps://www.flickr.com/photos/caenergy

CALIFORNIA DIESEL RETAIL PRICES BY REGION · Diesel Retail Prices by Region California Refinery...

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