Publications: The Petroleum Economics Monthly

The Consequences of the California Petroleum Industry's Unique Structure (June 2015)


Biologists use petri dishes to cultivate cells or bacteria and study their behavior. California, a state that would be the world’s ninth largest country were it independent from the United States, has become the world’s petro petri dish. Over the last one hundred years, the state has been transformed from one of the largest crude oil producers, home to many independent crude producers, independent refiners, and unbranded marketers, to a state heavily dependent on imported oil and dominated by a few large independent refiners. Recently, the state has also seen the entry of several large independent retail marketers.


In this report, we identify the causes of the 2015 California price spike or “excursion.” We begin by presenting data on the historical California market. We then demonstrate how the current high prices are directly related to the low inventories. Our analysis also shows the 2015 price excursion would be reduced or eliminated if the state’s holdings of gasoline and blend stocks were boosted four million barrels.


California’s experience is relevant to almost all petroleum markets today because integrated supply chains are ending. In the US, Europe, and even Asia, large integrated companies are selling refineries and leaving marketing to others. In five or ten years, many markets may experience similar disruptions. For this reason, events in California merit study across the globe.


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