'Perfect Storm' Propels Gas to Record High
The price of gasoline equaled the all-time average high in California of $4.61 a gallon Saturday (Oct. 6), fueled by a reduced supply and a volatile market.
Prices throughout the state were expected to increase for several more days before leveling off, after a temporary reduction in supply triggered a price spike that saw fuming motorists paying $5 or more per gallon in some locations and station owners shutting down pumps in others, The Associated Press reported.
AAA's Daily Fuel Gauge report released Saturday said the average price for a gallon of regular unleaded across California rose 12 cents from its Friday mark of about $4.49.
Saturday's price, the highest in the nation, equaled the record average high for California set in June 2008 of $4.61.
The Golden State leapfrogged Hawaii as the state with the most expensive fuel. The average price for a gallon of regular unleaded across California was 47 cents more than a week ago, according to the AAA report.
The national average Saturday was about $3.81 a gallon, the highest ever for this time of year. However, gas prices in many other states have started decreasing, which is typical for October.
The dramatic surge came because of a power outage Oct. 1 at a Southern California refinery reduced supply in an already fragile and volatile market, analysts said, but the refinery came back online Friday and prices were expected to stabilize this week.
Patrick DeHaan, senior petroleum analyst at GasBuddy.com, predicted the average price could peak as high as $4.85.
"There is some relief in sight but probably not for a couple of days. Early next (this) week is when we may see some more significant declines … but at retail prices, prices may climb for the next two to three days before they start to come down," he said.
While prices were higher everywhere in California, there were variances Saturday. Chico had the lowest average price at $4.46, according to AAA, while San Luis Obispo was highest at $4.71. Prices averaged $4.67 in San Diego, $4.66 in the Los Angeles area, $4.55 in Fresno and $4.49 in Sacramento.
A web of refinery and transmission problems is to blame, analysts said. The situation is compounded by a pollution law that requires a special blend of cleaner-burning gasoline from April to October, said Denton Cinquegrana, executive editor of the Oil Price Information Service, which helps AAA compile its price survey.
"We use the phrase 'the perfect storm,' and you know what, this current one makes those other perfect storms look like a drizzle. I don't want to scare anyone, but this is a big problem," Cinquegrana said. "Run-outs are happening left and right."
Among the recent disruptions, an Aug. 6 fire at a Chevron Corp. refinery in Richmond left one of the region's largest refineries producing at a reduced capacity, and a Chevron pipeline that moves crude oil to Northern California also was shut down.
There was some good news.
Exxon Mobil Corp. said a refinery in Torrance returned to normal operations Friday after a power failure Monday disrupted production for most of the week. State officials said with the refinery coming back online, prices should start falling.
"The wholesale market appears to have peaked and is heading down," said Alison apRoberts, a spokeswoman for the California Energy Commission. "Because it takes a little while for the price reductions to funnel through the system, consumers at the pumps should start to see some declines over the next week."
Gasoline inventories in California, however, are still at their lowest point in more than 10 years, a situation made worse by the mandate for the special summer gasoline blend. Few refineries outside the state can make it, meaning there are few outside sources to draw from for help, Cinquegrana said.
The California Air Resources Board was reviewing a request from the California Independent Oil Marketers Association for a waiver that would allow gas stations to begin selling winter-blend gasoline before Halloween.
David Clegern, a spokesman for the air board, said the California Energy Commission would have to review gas inventories to confirm there is a shortage and assess what effect the switch would have on air quality.
ApRoberts said Friday that the commission has determined that the state has plenty of gasoline to meet consumer demand.
Gil Duran, a spokesman for Gov. Jerry Brown, said in an email that his office is "monitoring the situation closely."
Some stations ran out of gas and shut down rather than take the risk of buying gas at soaring prices only to be stuck with a glut of overpriced fuel if prices dropped or if customers refused to absorb the extra cost that would be passed along to them.
The price of diesel fuel has also increased, adding significant costs for truckers who typically put hundreds of dollars' worth of gas in their tanks. The average price for diesel statewide was $4.50 a gallon Saturday — 37 cents more than a year ago, according to AAA.
At a truck stop and gas station off state Route 99, on the outskirts of Fresno, independent trucker Joel Vargas said if diesel hits $5 per gallon, he will probably stop driving because he would be losing money.
"With that kind of price, I won't be able to support myself and my family," he said.