GARDEN GROVE—A quick trip around the block this morning revealed rapidly rising gasoline prices at several stations in California. Last week, locals could buy a gallon of regular gasoline for $3.95 at BP/ARCO AmPm, but the price has jumped to $4.59, a 64-cent increase, in just a few days.
Premium gasoline is at $4.79 per gallon, while the 7-Eleven around the block is selling premium for $4.999 per gallon. Other areas in the state are still higher.
Price at the Pump Up, Crude Oil Down
The spike is not from an increase in crude oil prices—the cause is quite the opposite. According to Charles Langley’s end-of-May blog at FuelTracker.com, “Brent Crude—down ten cents a gallon in the last week and poised to bellyflop below $100 a barrel (trading at $102 this AM).”
Langley continued, “NYMEX Crude—Plunged below the $90 mark earlier last week and moved decisively into the high $80/bbl today at $87 this AM, down ten cents a gallon since Monday [last week].”
In February this year, Langley predicted, “… we will see high prices despite relatively affordable [crude] oil. In California, the reason is two-fold: First, our refineries have cut back production, which restricts the supply, which drives up prices, and second, local refineries are aggressively exporting fuel (especially diesel) overseas to keep supplies tight and costly on the West Coast.
Langley added, “Nationally, the East Coast could get hit especially hard with the announced closure of two major refiners that could potentially restrict supplies by as much as 50% on the Eastern Seaboard.”
Adding to the problem was the Aug. 7 Chevron refinery fire in Northern California, which Langley said was “causing the price of surplus gasoline in California to skyrocket.”
Adding more pressure is California refineries’s curtailing output for necessary seasonal gasoline blend changes this time of year in order to comply with California pollution regulations.
From Langley’s comments, it is clear that we live in a world marketplace. The highest bidder sets the price, and with the dollar sliding, it could worsen.
California Governor Jerry Brown Steps In
Governor Brown announced through the Air Resources Board that he is authorizing refiners to change to winter blends immediately. This seasonal process of changing blends would normally not take place until after Oct. 31.
“Gas prices in California have risen to their highest levels ever, with unacceptable cost impacts on consumers and small businesses,” said Governor Brown to the board. “I am directing the Air Resources Board to immediately take whatever steps are necessary to allow an early transition to winter-blend gasoline.”
According to his announcement, allowing an early transition to winter-blend gasoline could increase California’s fuel supply up to an estimated 8-10 percent, with only negligible air quality impacts.
This blend change, along with a tightening of fuel supplies caused by shutdowns at Tesoro and Exxon refineries, has caused spikes in gasoline prices.
The Exxon refinery came back online Friday and Tesoro is scheduled to resume production early next week. Combined, these actions are expected to stabilize and reduce fuel prices.
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