The Car and Truck Fleet and Leasing Management Magazine

Calif. Fuel Prices Rocket into Record Territory

March 1, 2004

Gasoline prices are heading into record territory, leaping nearly 10 cents since Monday, 35 cents in the last month, the San Jose Mercury News reported on Feb. 27. California motorists are now paying an average of $2.05 a gallon for self-serve unleaded fuels, and are faced with the prospect that the record average price of $2.18 a gallon set a year ago may be soon shattered. Several factors figure into the upward spiral of fuel prices: the growing economy, refinery retooling for summertime gasoline blends, record winter cold in Midwest and East Coast areas, OPEC production cuts and the state's conversion to ethanol as the fuel oxygenate of choice replacing MTBE. The report said that the state's 13 refineries can hardly keep pace with demand, operating at full capacity, so when refineries experience mechanical or other problems, the fall in refined product can send fuel prices skyward. The vulnerability of the refinery network nationwide, combined with low inventories of both gasoline and crude oil, have the government and energy experts increasingly nervous that some places in the U.S. will run out of gas temporarily. "Expect major regional gasoline shortages," warns A.F. Alhajji, associate professor and energy economist at Ohio Northern University. When that happens, prices zoom as gasoline wholesalers compete for supplies, giving a regional shortage national impact. Alhajji is confident that "gasoline prices will increase nationwide as we approach the driving season, even in areas that have adequate supplies." Average gasoline prices in California and Hawaii have topped $2 for a gallon of unleaded regular, and Nevada is close at $1.968, the American Automobile Association (AAA) said Wednesday. The AAA said regular averaged $1.681 nationwide, up 7.9 cents the last month. That's 5.6 cents less than the record average of $1.737 reported last Aug. 30.
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