The Car and Truck Fleet and Leasing Management Magazine

Gas Prices Near $5 Per Gallon in California Due to Regional Refinery and Supply Issues

October 08, 2012

TORRANCE, CA – Gas prices have hit record highs in California, with the average price for a gallon of regular gasoline reaching $4.671 (as of Oct. 9), according to AAA, which uses data from Oil Price Information Service and Wright Express.

In some part of the state, prices have surpassed $5 per gallon; with a Los Angeles Times story reporting gas prices as high as $5.69 per gallon at a gas station in Calabasas, Calif.

A variety of sources, such as AAA and California Governor Jerry Brown's office, attribute the cause of the jump in fuel prices to a combination of low inventory (due to the change to a winter fuel blend) and a power outage at an ExxonMobil refinery in Torrance, Calif. and a Tesoro refinery shutdown. These issues follow a fire at a Chevron refinery in Richmond, Calif., and the a Chevron pipeline shutdown in September in Northern California due to elevated chloride levels in the crude oil stream. Part of the supply issue is that California environmental standards requires a fuel blend that can't be supplemented with fuel from other regions.

In response to these high prices, Brown directed the California Air Resources Board (CARB) to allow refineries in California to make an early switch to winter blend gasoline. This type of fuel, which evaporates more easily and has slightly more of an environmental impact, according to Brown's office, typically isn’t sold until after Oct. 31. The Governor’s office stated that an early transition to this fuel type could increase the states’ fuel supply by 8 to 10 percent.

In addition to Brown’s recent directive to CARB, California Senator Dianne Feinstein sent a letter to the Federal Trade Commission asking for an immediate investigation of the sudden rise in gas prices in the state.

California Senator Barbara Boxer also called for an investigation on Oct. 8 in a letter to the U.S. Department of Justice, citing an article that claimed the quick rise in gas prices had "many of the hallmarks of a classic short squeeze."

By Greg Basich

Updated 10/9/2012, 10:30 a.m. with information about Boxer's letter, an updated fuel price, and information about California fuel standards.

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