As the Labor Day weekend approaches, the U.S. national average retail price for regular gasoline has drifted downward from a summer-to-date peak of $3.68 per gallon, reached on July 22, to $3.55 per gallon on August 26, despite an increase in crude oil prices since early July. This decrease in the U.S. average regular gasoline price has been led by declining retail gasoline prices on the West Coast (Figure 1). On August 26, the West Coast (PADD 5) average retail price for regular grade gasoline was $3.75 per gallon, 21 cents per gallon lower than the $3.95-per-gallon average on July 22.
The decline in retail prices on the West Coast results largely from a well-supplied California gasoline market. California is the largest gasoline market on the West Coast, accounting for almost two-thirds of gasoline sales in the region in 2012, and price trends in California tend to drive trends in the region as a whole. The average price for regular gasoline in California fell by 23 cents per gallon since July 22 to $3.80 per gallon on August 26. Data from the California Energy Commission indicate that in 7 of the last 10 weeks, California refiners' production of gasoline that meets the California Air Resources Board's specification (CARBOB) has been near or above the top of the five-year range for the given week. In contrast, EIA data show that gross refinery inputs for the entire PADD 5 region have been below the five-year average in recent weeks. This is partially attributable to the closure of Tesoro's 94,000-barrel-per-day Kapolei refinery in Hawaii earlier this year – the sale of which has since been announced and which is slated to reopen in September – and lower throughputs in other PADD 5 refineries outside of California. EIA does not collect state-level demand data, but trade press reports indicate that demand in California has been weak over the summer.
As of August 23, gasoline inventories on the West Coast (EIA does not collect inventory data for California alone) stood at 28.4 million barrels, 0.9 million barrels (3 percent) above the five-year average level for that week, and near the top of the 5-year range (Figure 2). The current inventory level is also 2.5 million barrels higher than inventories in late April, a significant counter-seasonal increase. Typically, West Coast inventories fall by about 3.0 million barrels from late-April to late-August. High inventory levels can provide a buffer against the price effects of refinery outages, especially in the relatively isolated California market, where resupply from outside the region can take more than a week to arrive and can be quite costly. Current gasoline inventory on the West Coast is much higher than in 2012, when the region experienced a series of unanticipated refinery outages that resulted in several retail gasoline price spikes. Last year, significant refinery outages early in the year resulted in tight gasoline supplies in the spring and persistently low inventory levels that did not recover until the middle of autumn.