Calif. to See Gas Prices Rise Again
California drivers should brace for a new surge in gasoline prices brought about by refinery problems, higher oil prices and increased demand, market watchers said Thursday.
Wholesale gasoline prices in Los Angeles and San Francisco have jumped about 25 cents in the last week, and that increase is expected to appear soon at the pump.
“We are once again having a gasoline price spike” in California, said Bob van der Valk, manager of fuel supply and marketing for Cosby Oil Co., an independent fuel distributor in Santa Fe Springs.
With wholesale prices jumping, “the dealer can eat it only so long,” Van der Valk said.
California gasoline prices have been rising steadily for weeks because of annual refinery maintenance, the yearly switch to summer-grade gasoline and a boomlet in gasoline demand sparked by the improving economy.
The state’s average price of self-serve regular gasoline was $1.331 a gallon Monday, up 23 cents since the beginning of the year, according to the Energy Information Administration.
But wholesale prices turned on the afterburners this week in California. Los Angeles spot price for regular grade gasoline leaped 10 cents a gallon on Thursday to 95.50 cents a gallon, according to Bloomberg’s energy price survey. That price does not include the nearly 50 cents in federal, state and local taxes that are charged on each gallon of gasoline.
The wholesale market is being roiled by outages at the Valero Energy Corp. refinery in Wilmington and the ChevronTexaco Corp. refinery in Richmond, in northern California, said Mark Mahoney, West Coast analyst for the Oil Price Information Service, a Lakewood, N.J., company that tracks gasoline prices.
The Valero refinery produces 50,000 barrels of gasoline a day and the ChevronTexaco refinery produces 120,000 barrels of gasoline a day--only a fraction of the 1 million barrels consumed daily in the state.
But because California’s super-clean gasoline, required by air-quality regulations, is produced primarily within the state, any time a refinery has a problem there is an immediate tightening of supplies followed by a price spike. A barrel holds 42 gallons of gasoline.
“You’ve got two units down and panic is setting in in the market,” Mahoney said.
Both refineries are expected to quickly fix their problems, which should moderate price increases in a few weeks, he said.
But the summer driving season is fast approaching and prices nationwide, which have been hovering between $1.10 and $1.14 a gallon on average for self-serve regular, could jump 15 cents to 20 cents a gallon by mid-summer, well below the hikes of last summer, according to the EIA, the statistical arm of the Department of Energy.
Higher oil prices also are contributing to the latest gas price increase.
Crude oil for April delivery rose 56 cents to close Thursday at $23.71 a barrel, a 51/2-month high on the New York Mercantile Exchange.
Analysts said oil rallied on expectations of an economic recovery and nervousness about a possible expansion of the U.S. war on terrorism.
The California refinery problems and refinery outages in Texas helped push gasoline for April delivery up as much as 2.35 cents to 76.38 cents a gallon on the Nymex, the highest price since Sept. 20.
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Bloomberg News was used in compiling this report.
