Los Angeles spot gasoline below $2.50/gal...'How the mighty have fallen!'

The spot price for the main grade of California-specific gasoline--known as Los Angeles CARBOB--slid below $2.50/gal for the first time today since January 2011. It is down by nearly a third from a multiyear high just four months ago. It is off $1/gallon in just the last month.

"How the mighty have fallen," said one West coast trading source.

Los Angeles CARBOB typically trades in 25,000-barrel lots as a differential to the NYMEX July RBOB futures contract. Platts assessed the value of that Merc contract at 3:15 pm EDT today at $2.6449/gal. That puts the outright price of Los Angeles CARBOB at $2.4949/gal, the lowest price since $2.4776/gal on January 27, 2011, according to Platts data.

Just four months ago, a fire shut BP's 225,000 b/d refinery at Cherry Point, Washington, a key West Coast refinery whose closure helped push Los Angeles CARBOB to a nearly four-year high of $3.7001/gal on February 24, 2011. The flat price deflated but then moved back up as high as $3.5531/gal on May 11, when the spread was plus 55 cts/gal. It since lost 70 cents on the differential. The rest of the decline is due to a falling NYMEX RBOB price.

A second West Coast gasoline trader noted other refineries in the region underwent an extended spring maintenance season, and there has been no incentive to store barrels, deterring imports. But Cherry Point returned in late May as most refineries exited maintenance. Add in poor demand and higher refinery output, and inventory has been building for weeks.

A third trader agreed the drop is steep, but said it was "just a matter of time before the selloff happened. "All this is a function of a sad economy," he said, among other factors.

The West Coast remains the region with the highest average retail price for regular gasoline, although it slid 12.9 cents to $3.964/gal in the survey week ending Monday, EIA data showed. As a rule of thumb, pump prices tend to be 70 cts higher after taxes and freight, indicating room for retail prices to go lower.

"Prices will definitely lag as folks have been clobbered on the way up," the third trader said.

A fourth trader said the decline would be a boon for a struggling California. "Let's get it back to $1.99," he said. "I mean, that would be great for the ecoomy."

Tweet