California Gas Price Rises Set to Slip After Reaching New Record

Tuesday, 09 Oct 2012 10:15 AM


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Gasoline prices at the pump in California rose to a record overnight Tuesday after Gov. Jerry Brown directed state regulators to allow refineries to produce more fuel by shifting to winter-grade fuel.

Regular gasoline at the pump climbed to a new all-time peak of $4.671 a gallon, according to data published today by AAA, the nation’s largest motoring organization. That’s up from the previous record of $4.668 reported at the same time yesterday. Prices jumped 50 cents last week as refineries reduced output and Chevron shut a pipeline because of contamination.

The California Air Resources Board granted refineries permission on Oct. 7 to make an early shift to the winter blend, typically not sold until after Oct. 31. The switch will allow refiners to produce as much 10 percent more gasoline by adding butane to the mixture, according to David Hackett, the president of independent fuel consultant Stillwater Associates in Irvine, Calif.

“It’s like creating another refinery overnight,” Hackett said by phone yesterday. “When it comes to price, people will see a difference tomorrow.”

Wholesale prices for California-blend gasoline, or Carbob, on the spot market, fell by 50.94 cents to $3.6131 a gallon yesterday in Los Angeles. The same 91-octane blend slumped 51.94 cents to $3.3931 in San Francisco.

Prices began to skyrocket after Exxon Mobil’s 150,000-barrel-a-day refinery in Torrance, near Los Angeles, reduced production Oct. 1 after a power failure. That followed a fire that knocked out a crude-processing unit at Chevron's plant in Richmond, near San Francisco, in August and the shutdown of a Chevron pipeline that delivers crude to Northern California because of contamination.

The state’s gasoline markets are particularly susceptible when refineries have outages because the state is mostly cut off from the oil-product pipelines spanning the rest of the country, according to the U.S. Energy Information Administration. Gasoline in California also has its own blending requirements to reduce smog and it’s difficult to import from other states.

Gasoline stockpiles in California dropped 122,000 barrels, or 2.1 percent, to 5.77 million in the week ended Sept. 28, according to the most recent data compiled by the state Energy Commission. That’s down 10 percent from a year ago and the lowest inventory level for that period since 1999.

Bill Day, a San Antonio-based spokesman for Valero Energy, said yesterday that the company is considering making the switch to winter grade at its refineries in Benicia and Wilmington. Exxon said on Oct. 5 that the Torrance refinery had resumed normal operations.

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