October 5, 2012 / 6:03 PM / 8 years ago

UPDATE 2-"Insane" surge in California gasoline prices starts to ease

By Braden Reddall and Nichola Groom
    SAN FRANCISCO/LOS ANGELES, Oct 5 (Reuters) - An
unprecedented spike in California gasoline prices showed signs
of easing on Friday, with some supply-stricken service stations
preparing to reopen and retail rates poised to ease after
topping $5 a gallon in many places.
    This week's abrupt price spike blindsided the state's
car-loving consumers and left some retailers in Los Angeles
scrambling for supply, causing wholesale prices to surge and
driving up pump prices by an average of 36 cents a gallon.
    But even as Golden State motorists awoke Friday to another
jump in prices, signs emerged that the worst of the run-up was
over: ExxonMobil said operations had resumed at a local
refinery that had been unexpectedly shut by a power outage;
wholesale prices dropped 55 cents, and Costco Wholesale Corp
 was preparing to reopen several stations.
    "The situation is starting to improve already," said Richard
Galanti, Chief Financial Officer at Costco, which had been
forced to shut about 14 its 40 Los Angeles-area stations. He
said five of those were expected to reopen on Friday.
    Even so, the sticker shock was still reverberating across
the state and officials rushed to reassure consumers that
California was not running out of fuel.
    At a gas station in the Brentwood section of Los Angeles,
prices were up 41 cents from Thursday and well above $5 a
    "I'm absolutely shocked that gas here is $5.39," said
Jennifer Wilson, an executive recruiter from San Diego who
stopped to fuel her Toyota Corolla on her way to picking up her
daughter, a student at UCLA.
    "We need at least a half tank to get back to San Diego. I'm
definitely feeling the pain," she said.
    The average retail price of gasoline in California rose 17
cents to $4.486 a gallon early on Friday. The average price was
$4.315 on Thursday and $4.131 a week ago, according to AAA data.
    "We're in brand new territory," said Marie Montgomery, a
spokeswoman for the Auto Club of Southern California. "It always
seems like just when you've seen everything and you can't be
shocked anymore, you are shocked again."
    The average price is just 12 cents below the highest
recorded statewide price of $4.61, which was reached in June
    "It's insane," said Matt Hurd, 35, as he filled up at a San
Francisco gas station near the Bay Bridge. "Especially with this
thing," added Hurd, who works in real estate, motioning toward
his white SUV. "It's going to cost triple-digits to fill it up."
    The first signs of a shortage emerged on Monday after
western U.S. refiner Tesoro Corp halted sales to
retailers that do not carry its brand name, according to market
sources. Tesoro declined to discuss its wholesale operations.
    That development emerged after a series of events conspired
to strain supplies, causing gasoline inventories in the West
Coast region to fall this week to their third-lowest level of
the past two decades, on a seasonal basis, government data
    Earlier this summer, Chevron Corp's Richmond,
California, refinery was shut down after a fire, while a Chevron
pipeline that carries crude oil from the state's Central Valley
to refineries in the San Francisco Bay area has been closed
since mid-September.
    More recently, Phillips 66 had shut two plants to
conduct planned maintenance, and then a power outage at Exxon
Mobil Corp's Torrance, California refinery struck on
Monday, disrupting operations for days.
    In addition, California refineries have already dropped
production in anticipation of switching over to a seasonal
"winter blend" of gasoline next month.
    But on Friday, Exxon said the Torrance plant had resumed
operations, helping ease supply fears.
    Gasoline blended to meet California's strict environmental
standards traded at 90 cents a gallon over the November RBOB
contract on the New York Mercantile Exchange, down 55 cents from
where it traded on Thursday. California gasoline was later
offered at 85 cents over the NYMEX.
    "The squeeze is over, I guess," a trader said.
    Valero Energy Corp said on Friday it was still
temporarily withdrawing from the Los Angeles spot refined
products market to assure supplies to branded and unbranded
retail stations.
    State officials said California was not running out of
    "People may not find gas at a price that they like and there
may be some stations where they used to get it that they can't,
but our analysis says there is enough gasoline to meet demand,"
said Alison Roberts, a spokeswoman with the California Energy
Commission (CEC).
    On Thursday, the California Independent Oil Marketers
Association, which represents wholesale and retail marketers of
gasoline, asked the California Air Resources Board, an air
quality regulator, to allow early sale of winter-blend gasoline,
the CEC said.
    Gas stations in the country's most populous state can begin
selling winter-blend gasoline, which more easily releases
smog-causing substances, on Nov. 1. Until that date, only
summer-blend gasoline, which is less likely to evaporate into
smog-causing chemicals, can be sold.
    ARB could also permit gasoline from neighboring states that
does not meet California's strict emission standards. An ARB
spokesman said the board is evaluating the emergency request,
but said there is no timetable for a decision.
    In the Los Angeles area on Friday, the average price climbed
19 cents to $4.539 from $4.347 a day earlier. In San Francisco,
prices climbed 16 cents overnight to $4.596.
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