California gas prices should fall soon, analysts say
California’s average gasoline price set another record Monday, but there were signs that the run-up may come to an end even before the cheaper winter blend of fuel reaches consumers.
Analysts said wholesale fuel prices plunged Monday, a decline that should be reflected at the pump this week.
But many Californians were still angry and bewildered about how state gasoline prices could have jumped 50 cents a gallon in one week when demand is weak and there was little proof of a shortage in fuel stocks. Fuel experts have attributed the increase to an oil pipeline problem and a slew of maintenance procedures and refinery mishaps, the latest of which occurred Oct. 1 when the Exxon Mobil refinery in Torrance lost power.
“This was just dreadful,” said Sen. Dianne Feinstein (D-Calif.), who called on the Federal Trade Commission to investigate the leap in prices. Trade reports indicated that Tesoro Corp. was short of supply last week and that fuel sellers required the company to pay near-record wholesale prices, which were passed on to consumers, she said.
“Was this a squeeze? We do not know,” she said. “We are not in a position to know. We need to have oversight and, where necessary, prudent regulation.”
In a letter to FTC Chairman Jon Leibowitz, Feinstein expressed concern that the commission is “failing to take action to protect California consumers from malicious trading schemes in the California gasoline market.”
The latest state-tracked data show fuel supplies near normal, she said, which “appears to confirm that market fundamentals are not to blame for rising gas prices in California,” despite recent pipeline and refinery woes.
Separately, Sen. Barbara Boxer (D-Calif.) urged the Justice Department to look into the circumstances of the price leap, saying: “Californians have too often been victimized as unscrupulous traders have created or taken advantage of supply disruptions to drive up energy prices.”
California Atty. Gen. Kamala D. Harris said her office “will vigilantly monitor our gas and oil markets to ferret out any collusive or unlawful activity by oil and gas companies, refineries, traders and others.” Harris also opened an investigation into whether the proposed $2.5-billion purchase of the Arco brand and refinery by Tesoro Corp., announced in August, would harm consumers.
On Oct. 1, the average price for a gallon of regular gasoline in California was $4.168 a gallon, according to the AAA Fuel Gauge Report. That was already an eyebrow raiser, the highest ever recorded for that day of the year.
Then, analysts said, anxious fuel buyers pushed the wholesale price of gasoline to an all-time high Thursday on sudden concerns about supply. Many filling stations closed their pumps when they ran out of fuel, as owners worried that if they bought more, they would be stuck selling that gas at a loss when prices fell.
Monday marked a third straight day of all-time high retail prices in California. The average of $4.668 for a gallon of regular gasoline was up 1.3 cents from a day earlier.
On Sunday, Gov. Jerry Brown took the unusual step of calling on the state’s Air Resources Board to grant an immediate waiver that would let refineries make and sell winter-blend gasoline, aiming to ease supply concerns and reduce prices.
For air quality reasons, the state’s refineries normally are not allowed to begin selling winter blend — which is cheaper to make than summer-blend gas — until the end of October. That’s because the winter formulation tends to evaporate more quickly in warm weather.
Brown said the early changeover was necessary, and environmentalists largely did not object. The board agreed to grant the waiver.
Retail gasoline prices should start to decline this week, analysts said, adding that the sale of cheaper winter blend should accelerate that process.
“These nonsensical fuel prices should disappear by next week,” said Tom Kloza, chief oil analyst for the Oil Price Information Service. “The spike should be over.”
For Feinstein, the sudden rise in prices brought back reminders of the manipulation of California electricity markets for profit by Enron Corp. and others in 2000-01.
“I feel very strongly that we need to look into this, and this is an appropriate role for the FTC,” Feinstein said.
Consumer advocates agreed.
“I really question how the refineries shut down for things like repairs in ways that seem to have maximum impact on consumers,” said Ken McEldowney, executive director of Consumer Action, based in San Francisco. “I can only conclude that they do it primarily in terms of increasing profits.”
For other groups, the price surge provided a chance to promote their issues.
The California Advanced Energy Coalition urged the California Air Resources Board to adjust fuel regulations in a way that would accommodate and encourage the use of more low-cost and cleaner-burning fuels, such as ethanol.
“We believe with focus and urgency, dictated by chronically high gasoline prices, California’s regulations should be immediately amended to allow for increased ethanol, in a manner that enhances air quality and lowers gasoline prices,” said Eric McAfee, chief executive of Aemetis Inc., an advanced biofuel producer in Cupertino, Calif., and a member of the coalition.
