Labor Dispute at Tesoro Refinery Boosted Margins

A 52-day labor strike that led to a shutdown at Tesoro Corp's refinery in Martinez, California, helped boost the company's bottom line last quarter, the company's chief executive said on Friday, prompting cries that the state's gasoline market needs to be reformed.

"There's no question that during the first quarter with what happened to Tesoro as a result of the disruption at the Martinez refinery because of the labor disruption and then with other operating and planned maintenance things across the whole system, it was very supportive to the margin environment there," CEO Gregory Goff said during a call with investors.

The 166,000 barrel-per-day Golden Eagle refinery, which is located in the San Francisco Bay Area, was undergoing maintenance when the United Steelworkers union called for a work stoppage at the plant as part of a national labor dispute that was resolved in March.

California wholesale gasoline prices rose at their quickest week-on-week rate ever in February when Exxon Mobil (XOM)'s refinery in Torrance, California, was rocked by an explosion and fire, further constraining supply to the market.

Jamie Court, president of Consumer Watchdog, said the comments show that the California market is not working for the average driver. He said Tesoro's profit per barrel in the first quarter jumped by 20 cents, amounting to California profits of $119 million for Tesoro.

"California's oil refiners are the only industry in America that make a fortune when their factories break down," Court said.

Tesoro spokeswoman Tina Barbee said the decision to stop production at Golden Eagle during the strike was a safety precaution since the refinery was undergoing maintenance when the strike was called.

She said that there are many factors that impact margins on the West Coast.

Also on Friday, California state Senator Ben Hueso, chair of the energy committee, and Senator Jim Beall, chair of the transportation committee, sent a letter to seven oil company CEOs, including Goff, asking questions about the state's gasoline market.

They asked for the amount of gasoline and diesel kept in reserve at each refinery, how it is decided when to schedule refinery maintenance, and why retail gasoline prices increase when their competitors experience a refinery outage.

In addition to Tesoro, the letter was sent to the CEOs of Shell, Alon, Phillips 66, Valero, Exxon Mobil and Chevron (CVX).

(Reporting by Rory Carroll; Editing by Leslie Adler)