CA gas spikes raise hackles

gas pumpCalifornia gas prices have once again jumped out to dramatic highs, setting consumers on edge and reopening old questions about who’s to blame. Some analysts, including those at GasBuddy.com, pointed a finger at foreign wholesalers, while others, such as Trilby Lundberg, said those suppliers were now moving their product quickly to market, the Associated Press reported.

“Wholesale prices in Southern California jumped by about 70 cents late last week. A report on gasoline inventories from the U.S Department of Energy appears to have sparked the run-up,” as U-T San Diego reported. “Statewide inventories of low-polluting gasoline blends, meanwhile, shrank to 10.04 million barrels on July 3 — the lowest in 12 months, according to the California Energy Commission.”

Regulators in Washington, D.C. added more bad news. According to the San Jose Mercury News, “federal energy officials say California refiners had to use 1.1 million barrels from their storage tanks. It’s so bleak that imports to the West Coast sank to zero last week after averaging more than 100,000 barrels a day over the previous four weeks.”

Republished with permission by Cal Watchdog.com

Infrastructure problems

Despite concern over the state’s gasoline infrastructure, California has remained an outlier relative to the rest of the continental United States. “They have their own refining system. They can’t get the imports the rest of the world does and they have an adversarial relationship system between the refiners and the regulatory community,” Tom Kloza, global head of energy analysis at Oil Price Information Services, told CNBC.

Because of a combination of high taxes and unstable supply, the price floor for California gasoline has long hovered well above per-gallon costs elsewhere. “Retail prices in California are traditionally among the highest in the lower 48 states because of relatively high state and local taxes combined with strict environmental rules governing gasoline blends and pollution,” U-T San Diego observed. But some critics have cautioned that the Golden State’s broadening regulatory effort to further reduce fossil fuel usage could contribute to surprising spikes. Kloza warned CBC that California “can’t tell refiners you are going to put them out of business and expect that everything is going to run smooth.”

A consolidated market

At the same time, some consumer advocates put forth a competing argument, pinning the blame for this most recent spike on refiners themselves. Jamie Court, president of Santa Monica-based Consumer Watchdog, told the Los Angeles Times that circumstantial evidence suggested prices were being manipulated. “Part of the problem, Court said, is that the state has a small group of companies able to set prices as they please — the definition of an oligopoly.” Court cited “a recent streak of high premiums charged to brand-name stations by refineries” and the export of “record amounts of fuel to other countries, which can keep state inventories low.

Charges of price manipulation have been explored in the past. As the Los Angeles Times noted, investigations conducted more than a decade ago revealed “major oil companies worked diligently in the 1990s to reduce refinery capacity so that profits would improve.” But investigators “found no evidence of collusion or price fixing.” Nevertheless, the Times added, California’s production capacity has been dramatically limited and consolidated. “In 1982, the state was home to 30 gasoline-producing refineries; now there are 11. Chevron Corp. and Tesoro Corp. control more than 50% of the state’s refining capacity.”

Calls for relief

Californians routinely consider how policymakers can make prices and supply more reliable and predictable. In an unusual move, GasBuddy itself launched a petition for relief directly from Sacramento. “We’re anticipating increases that could surpass 50-cents a gallon in Southern California and up to 20-cents a gallon in Northern California by next week,” said Patrick DeHaan, the site’s senior petroleum analyst for GasBuddy.” That’s why we’re asking Governor Brown to intercede and issue a waiver in the public interest.”

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