Usual Suspects Surface as California Gasoline Prices Soar

Friday, April 18, 2014

One month ago, Charles Langley at made a bold prediction:

“At this time, the price of fuel SHOULD be declining due to an over-supplied market, yet refiners will probably do their utmost to push prices higher in the next couple of weeks with an announcement of a major shutdown, fire, or a series of announcements about minor production problems that could put a pinch the gasoline pipeline and raise the price of wholesale fuel.”

Right on cue came this week’s headlines. “Gasoline Prices Jump in California As Refineries Encounter Trouble,” “Gas Prices Rapidly Rise” and “Southern California Gas Prices Soar above $4 a Gallon.”

The statewide price of regular gasoline was 4.196 a gallon on Thursday, around 13 cents higher than a week ago, and 23 cents more than a month or year ago, according to AAA. The national average is about 50 cents a gallon less.

Why the surge? The Los Angeles Times rounded up the usual suspects. A couple of refineries are experiencing problems after making the annual switch to spring fuels as mandated by California air quality regulations. The price of ethanol, a component of California gas, is soaring on the heels of failed corn crops in the Midwest. Turmoil in the Ukraine has oil companies nervous and Tuesday’s “blood moon” has made everyone insane.

One of those explanations is more ludicrous than the others, but all of them are suspected of being somewhat short of truthful by cynics who have watched the monopolistic oil industry whipsaw California drivers for decades. But even a noncynic might wonder why Bruce Bullock, executive director of Southern Methodist University's Maguire Energy Institute, would forget about California’s unseasonably warm weather when he speculated that, “"People have gotten cabin fever and got out and started driving a little earlier.”

In October 2012, Senator Dianne Feinstein (D-California) demanded that the Federal Trade Commission (FTC) investigate “malicious trading schemes” she suspected were at the heart of a $1-a-gallon increase in a single week. “Publicly available data appears to confirm that market fundamentals are not to blame for rising gas prices in California,” she wrote.

That spike was variously attributed to a Chevron refinery fire in Richmond, pipeline contamination, refinery maintenance, state pollution restrictions, retailer fears, buyer panic and California karma. Nothing came of Feinstein’s request, but the public had a new standard by which to judge its pump price misery.

Patrick DeHaan at said the price hike is due to “refinery kinks” that have “pinched supply,” which is running 7% behind a year ago and 10% behind last week. Los Angeles and Southern California have been hit the hardest, experiencing a 16-cent weekly jump. The Bay Area is up 12%.   

Langley cited the Third Law of Gougeonomics in 2010 to explain why prices will continue to rise erratically over time: Gasoline will be held hostage. . . . The new industry model is to make less gasoline and charge more for it.”

Langley told ABC San Diego this week, “We saw an Exxon refinery go down in Southern California and a Tesoro refinery go down in Northern California,” he said. “Together, those two refineries manufacture 16 percent of the state's supply of gasoline.”  Jeffrey Spring at AAA said a Chevron refinery in El Segundo will also be down for a couple more weeks.

But Langley took one more speculative stab at coming up with another reason for high prices that might sound paranoid if he wasn’t talking about oil companies. “They'll literally export fuel at a loss overseas to drive up the price on the west coast, which is very profitable,” he said.

–Ken Broder


To Learn More:

Why the West Coast Is Ripe for a Series of Gasoline Refinery Disasters, Glitches, or Hiccoughs (by Charles Langley,

California Cringing at Gas Pumps Statewide (by Patrick DeHaan,

Gasoline Prices Jump in California as Refineries Encounter Trouble (by Shan Li, Los Angeles Times)

Southern California Gas Prices Soar above $4 a Gallon (by Kevin Smith, San Gabriel Valley Tribune)


Tesoro Wins OK to Make Tight California Oil Market Even Tighter (by Ken Broder, AllGov California)

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