As California gas prices soar, political heat rises
By Braden Reddall and Erwin Seba | Reuters – 4 hrs ago
SAN FRANCISCO/HOUSTON (Reuters) - California Governor Jerry Brown
on Sunday ordered pollution regulators to let service stations stock
winter-grade gasoline early after an abrupt price spike last week sent
some pump prices past $5 a gallon and left residents fuming.
Wholesale markets
indicated that prices would likely ease in the coming days, but the
political fallout may be just beginning. U.S. Senator Dianne Feinstein wrote a second letter on Sunday asking for federal regulators to investigate possible price manipulation in the California gasoline market.
A series of refinery mishaps have constrained gasoline supply in California,
which is largely cut off from U.S. national pipeline and refinery
networks and thus more subject to supply and price disruptions.
Reuters reported on
Friday that a "short squeeze" in trading markets may have also played a
role in an unprecedented wholesale price increase of almost $1 a gallon
last week for California-grade gasoline.
Brown's order will allow retailers to begin selling
winter-blend gasoline, which is more plentiful and easier to make but
emits more polluting vapors, ahead of the traditional October 31
transition date.
"Allowing refiners
to make an early transition to winter-blend gasoline could quickly
increase fuel supply and provide a much needed safety valve with
negligible air quality impacts," Brown said in a letter on Sunday to the
California Air Resources Board, which regulates the types of gasoline sold in California.
The Air Resources Board issued regulations late on Sunday allowing the immediate manufacture, importation, and sale of winter-blend gasoline.
Feinstein, in a letter to the Federal Trade Commission
(FTC), called for the agency to implement broad monitoring of
oil-trading markets and investigate possible "collusion."
"Publicly available data appears to confirm that market fundamentals are not to blame for rising gas prices in California,"
she wrote, citing state data that showed gasoline production last week
was almost as high as a year ago and that gasoline and blending
components were equal to this time last year.
The California
senator cited Reuters' Friday report on the "short squeeze," in which
traders said refiner Tesoro Corp had to scramble to buy fuel from other
companies to meet commitments.
While traders told
Reuters that no single party appeared to be withholding supply
intentionally and that there was no suggestion anyone conspired to drive
up prices, Feinstein wrote: "An FTC investigation is likely the only
way to determine whether this reported squeeze took place."
SUPPLY BOOST COMING
California traditionally has some of the highest gasoline prices
in the United States, but the gap has widened dramatically over the
past week. Average retail prices hit a peak of $4.655 a gallon on
Sunday, compared with a national average of $3.814 a gallon.
The supply constraints have been largely attributed to problems at several of the state's biggest refineries.
An August 6 fire
shut down the key crude refining unit of Chevron Corp's 245,000
barrel-per-day plant in Richmond, California. On October 1, prices rose
on news of a power failure at Exxon Mobil
Corp's 149,500-bpd Los Angeles-area refinery in Torrance, California,
though the company said operations were restored by Friday.
Analysts said the decision to move up the state's
transition to winter gasoline would give a significant boost to the fuel
pool."Gasoline supply will go up 10 percent with the change to winter-blend gasoline," said David Hackett, president of Stillwater Associates, an energy consultancy in Irvine, California. "That's like adding another Exxon Torrance."
Bob van der Valk, a refined products market analyst from Terry, Montana, said proprietary oil company pipelines from the refineries would be able to start shipping winter-blend gasoline right away.
But Kinder Morgan Energy Partners,
which operates the largest pipeline network on the West Coast, has set
an October 15 start date for when it will accept winter-blend gasoline
for shipment.
Reduced gasoline availability forced some retailers to turn off their pumps. Costco
shut 14 of 40 filling stations in the Los Angeles area late last week,
although on Sunday, the firm's website said all California stations were
now open.
Southern California has borne the brunt of the supply disruptions and has seen the highest prices in the state.
In her letter
calling for the FTC to establish a permanent market-monitoring team for
oil and gasoline markets, Feinstein noted that California commuters already faced the highest gas prices and the longest commutes in the country.
"Paying hundreds of
dollars to fill your tank every time you go to the pump is untenable,
particularly because it does not appear the price spike and supply
disruption are in any way related to supply and demand," she added.
"I fail to understand why the FTC has not yet set up its own unit to oversee oil markets."
(Reporting by
Braden Reddall in San Francisco and Erwin Seba in Houston; Editing by
Jonathan Weber, Diane Craft and David Brunnstrom)
end quote from:
The flak over this likely will get worse before it gets better because the prices have nothing at all to do with supply and demand.
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