February 2020

PETROLEUM WATCH CALIFORNIA ENERGY COMMISSION

INSIDE NEWS

Gasoline Retail Prices by Brand REFINING NEWS

Diesel Retail Prices by Region • PBF Torrance: On January • Chevron Richmond: On February 10, a flaring event took California Oil Field Production 20, an emergency flaring event took place. place due to a process upset in one of the units, prompting California Oil Field API Gravity 2018 • Valero Wilmington: On January 25 through February 1, the precautionary evacuations Oil from the U.S. to California refinery experienced flaring of less than 100 people. Properties of Oil from Other due to planned maintenance. Countries to California • Chevron El Segundo: On January 30, an emergency Sources of Oil to California flaring event took place. Featured Topic: What Types of Oil Do California Refineries Process? GASOLINE RETAIL PRICES BY BRAND

January 2020 vs. 2019 $4.60 (Percentage Change) $4.40 76 8% higher $4.20 ARCO 8% higher $4.00 Chevron 7% higher $3.80 Hypermart 8% higher $3.60 Shell 8% higher $3.40 $3.20 Unbranded 8% higher $3.00 Valero 8% higher Dollars per Gallon (Nominal) Gallon per Dollars $2.80

January 2020 Averages $2.60 76 $3.63 Jul-19 Apr-19 Oct-19 Jun-19 Jan-20 Mar-19 Feb-19 Feb-20 Nov-19 Dec-19 Aug-19 Sep-19 ARCO $3.28 May-19 76 ARCO CHEVRON Chevron $3.71 HYPERMART SHELL UNBRANDED Hypermart $3.19 VALERO Source: California Energy Commission (CEC) analysis of Oil Price Information Service (OPIS) data Shell $3.68 Unbranded $3.40 Valero $3.51

DIESEL RETAIL PRICES BY REGION

January 2020 vs. 2019 $4.40 $4.30 (Percentage Change) $4.20 Northern CA 3% higher $4.10 Central CA 2% lower $4.00 Southern CA 3% higher $3.90

January 2020 Averages $3.80

Northern CA $3.77 $3.70

Central CA $3.67 $3.60 Dollars per Gallon (Nominal) Gallon per Dollars Southern CA $3.88 $3.50

$3.40 Jul-19 Apr-19 Oct-19 Jun-19 Jan-20 Mar-19 Feb-19 Feb-20 Nov-19 Dec-19 Aug-19 Sep-19 May-19

Northern Central Southern

Source: CEC analysis of OPIS data

CALIFORNIA OIL FIELD PRODUCTION

300

250

200

Other Counties

Ventura

150 Los Angeles Million Barrels Kern (Kern River)

100 Kern (Belridge, South)

Kern (Midway-Sunset)

50

Kern (Other Fields)

0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: CEC analysis of California Geological Energy Management Division (Cal GEM) data

CALIFORNIA OIL FIELD API GRAVITY IN 2018

15.0%

CRUDE TYPE

HEAVY

MEDIUM

LIGHT 10.0% Percent of Production Percent

5.0%

0.0%

10 15 20 25 30 35 40 45 American Petroleum Institute (API) Gravity Source: CEC analysis of Cal GEM data

OIL FROM THE U.S. TO CALIFORNIA

120 7

6 100

5 80

4 60 3

40 Millions of of Barrels Millions Millions of of Barrels Millions 2

20 1

0 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Alaska Lower 48 States New Other US States North Dakota Wyoming Utah Source: CEC analysis of CEC and Energy Information Administration (EIA) data

PROPERTIES OF OIL FROM OTHER COUNTRIES TO CALIFORNIA

MIDDLE EAST

4.0 4.0 COUNTRY COUNTRY

IRAQ 3.5 3.5 MEXICO

3.0 3.0

2.5 2.5

2.0 2.0 Sulfur Sulfur

1.5 1.5

1.0 1.0

0.5 0.5

0.0 0.0

10 15 20 25 30 35 40 45 50 10 15 20 25 30 35 40 45 50 API Gravity API Gravity

AFRICA, ASIA, EUROPE, & OCEANIA

4.0 COUNTRY 4.0 COUNTRY

ANGOLA ARGENTINA 3.5 3.5 BRUNEI BRAZIL

3.0 EQUATORIAL GUINEA 3.0

GHANA 2.5 2.5 KAZAKHSTAN PERU

2.0 NIGERIA 2.0 TRINIDAD AND TOBAGO Sulfur Sulfur RUSSIA 1.5 1.5 UNITED KINGDOM

1.0 1.0

0.5 0.5

0.0 0.0

10 15 20 25 30 35 40 45 50 10 15 20 25 30 35 40 45 50 API Gravity API Gravity

Source: CEC analysis of EIA data

SOURCES OF OIL TO CALIFORNIA

800

700

600 Other Foreign

500

Ecuador 400 Alaska Saudi Arabia

300 Millions of of Barrels Millions

200 California

100

0 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: CEC analysis of CEC, Port Import/Export Reporting Service, and California State Lands Commission data

FEATURED TOPIC

WHAT TYPES API GRAVITY AND SULFUR CONTENT OF U.S. CRUDES OF CRUDE OIL 2.50 Sour DO CALIFORNIA 2.00 California REFINERIES PADD 4 1.50 PROCESS? PADD 2 PADD 3 PADD 5 1.00 WHAT IS CRUDE OIL? (Includes CA) PADD 1

Sulfur Content (%) 0.50 Crude oil, or petroleum, is composed Sweet of hydrocarbons and other organic 0.00 materials found in the Earth’s crust. 20 25 30 35 40 Crude oil is refined primarily to Heavy Light provide energy through transportation API Gravity fuels, such as gasoline and diesel, Source: CEC analysis of CEC and EIA data and to produce petrochemicals or heavier crude oil would require CRUDE OIL FROM THE REST used to create products such as major changes to the refinery. To OF THE plastics and pharmaceuticals. get their desired crude type, refiners The chemical makeup of crude oil may mix many types of crude, like The largest supplier of Oil from the varies depending on the location of light and heavy crudes; or they may U.S to California refineries is Alaska. extraction. The petroleum industry mix only a few types, like medium Imports from Alaska vastly outweigh measures the quality of crude oil crudes. Deciding which crudes to imports from the lower 48 states. using the following properties: mix depends on factors like price, The other largest suppliers of oil to specific gravity, sulfur content, acid availability, and refinery maintenance. California are New Mexico, North content, nitrogen, viscosity, pour Dakota, Utah, and Wyoming. The The API Gravity and Sulfur Content of point, mercaptan, hydrogen sulfide, 2018 API Gravity of U.S. Crudes fall 1 U.S. Crudes chart displays properties metals, and organic chlorides. within the light crude category. of crudes used by California refineries The most widely reported crude compared to the properties of crudes properties are specific gravity and used in other Petroleum Administration 2018 API GRAVITY OF U.S. CRUDES sulfur content. Specific gravity for Defense Districts (PADDs). PADDs measures the density of a substance are geographic aggregations: PADD State Average API compared to water. The petroleum 1 is the East Coast, PADD 2 is the Alaska 32 industry uses the American Petroleum Midwest, PADD 3 is the Gulf Coast, New Mexico 43 Institute (API) gravity scale, which sets PADD 4 is the Rocky Mountains, and North Dakota 44 the density of water at 10 degrees. PADD 5 is the West Coast. On average, Utah 39 A refinery will use API gravity to California crude inputs are heavier and Wyoming 39.5 categorize crude oil as light (more sourer than inputs in the rest of the Source: CEC analysis of CEC and ExxonMobil data than 31.1 degrees), medium (22.3 United States. In 2018, crude inputs CRUDE OIL FROM to 31.1 degrees), heavy (10 to less to California refineries had an average OTHER COUNTRIES than 22.3 degrees), or extra heavy API gravity of 26.18 and an average (less than 10 degrees).2 Crude that sulfur content of 1.64 percent. There are many reasons why California is on the heavier, more viscous side refineries import different types of of the API gravity scale is denser. SOURCES OF CRUDE OIL TO crude oil, but all are rooted in meeting Extracting a heavy crude (with for CALIFORNIA REFINERIES refinery needs.Properties of Oil from example an API gravity of 12) from Other Countries to California shows the ground is like trying to drink a In 2018, California refineries received the major crude supplying countries milkshake through a thin straw. 31.1 percent of their crude from by color and import volumes are Sulfur content of crude oil is measured California, 11.4 percent from Alaska, represented by the size of the circle. by the percentage of sulfur within and 57.5 percent from foreign In 2018, California refineries imported crude. Higher sulfur content in sources. Sources of Oil to California foreign oil from three major regions: crude oil is undesirable because displays the top suppliers of crude. , South America, and North transportation fuels have a sulfur The top three foreign sources America. The largest supplier of light content limit due to the formation are Saudi Arabia, Ecuador, and crude to California is Saudi Arabia, of harmful sulfur oxides when Iraq. Foreign sources of crude are with 134.8 million barrels. Other large sulfur burns. Also, because sulfur is increasing because California and suppliers from the Middle East are Iraq corrosive, crude oil that has high sulfur Alaska oil fields are aging. As the oil (29.8 million barrels) and Kuwait (22.5 content is more damaging to refinery fields become older and depleted, million barrels), which are also light equipment and pipelines. Crude oil is extracting crude oil becomes more crude sources. All crude oil coming considered sweet if sulfur content is difficult. Foreign imports supplement out of the Middle East is sour, having a 0.5 percent or less, and sour if sulfur declining domestic sources. sulfur content greater than 0.5 percent. content is more than 0.5 percent.3 CALIFORNIA’S CRUDE OIL As production in California oil fields The properties of crude oil are used has declined, California refineries to help determine its market value. California crude oil production in have filled their need for heavy crude Crude oil that is light and sweet is 2018 breaks down into the following oil by increasing imports from South usually more expensive than crude API gravity categories: 68 percent America. The largest supplier of crude that is heavy and sour. A reason of crude oil is heavy, 24 percent is oil from the region is Ecuador (51.8 for this is that light sweet crudes medium, and the remaining 8 percent million barrels), primarily supplying are less energy-intensive to refine is light. California Oil Field API Gravity heavy crude. The next largest supplier than heavy sour crude. Refiners mix in 2018 shows the distribution of is Colombia with an API gravity of many types of crude oil from both API gravity for California crudes. 18 to 28 degrees. Brazil is the final foreign and domestic sources to major supplier in the region, providing California Oil Field Production breaks achieve their desired crude profile. 17.6 million barrels as two distinct down production by county and crudes, a heavy crude (15 to 18 API) WHAT KIND OF CRUDE OIL GOES region. Kern County produces the and a medium crude (26 to 31 API). most in California, with 65.7 percent INTO CALIFORNIA REFINERIES? Crude from North America consists of total oil in 2018 originating from of small quantities from Canada Kern oil fields. The top three producing Refiners work towards processing (10.9 million barrels) and Mexico (15 oil fields in Kern County are Midway- crudes with similar properties million barrels) with the majority of Sunset (12 percent), Belridge-South because a significant shift to a lighter crude oil being heavy and with sulfur (12 percent), and Kern River (9.5 content around 2 percent. Refiners percent). Together, the three fields source the remaining crude from extract about as much oil as the rest Africa, Asia, Europe, and Oceania, of the producing counties combined. which ranges in crude properties.

1 McKinsey Energy Insights, Qualities (crude) https://www.mckinseyenergyinsights.com/resources/refinery-reference-desk/qualities-crude 2 API Gravity http://www.petroleum.co.uk/api 3 Sweet vs. Sour Crude Oil http://www.petroleum.co.uk/sweet-vs-sour

Gavin Newsom Karen Douglas, J.D. CALIFORNIA Governor J. Andrew McAllister, Ph.D. ENERGY Patty Monahan David Hochschild Commissioners COMMISSION Chair Drew Bohan Janea A. Scott, J.D Executive Director Vice Chair FOR MORE INFORMATION Instagram California's Petroleum Market Twitter LinkedIn Weekly Fuels Watch Subscribe

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