Jump in California gas prices leads stations to close doors, charge record prices

By Gillian Flaccus

Associated Press

Published: Friday, Oct. 5 2012 1:45 p.m. MDT

Gasoline prices higher than $5 per gallon are posted at a Menlo Park, Calif., Chevron station on Friday, Oct. 5, 2012. Californians woke up to a shock Friday as overnight gasoline prices jumped by as much as 20 cents a gallon in some areas, ending a week of soaring costs that saw some stations close and others charge record prices. The average price of regular gas across the state was nearly $4.49 a gallon, the highest in the nation, according to AAA's Daily Fuel Gauge report.

Noah Berger, Associated Press

LOS ANGELES — Californians woke up to a shock Friday as overnight gasoline prices jumped by as much as 20 cents a gallon in some areas, ending a week of soaring costs that saw some stations close and others charge record prices.

The average price of regular gas across the state was nearly $4.49 a gallon, the highest in the nation, according to AAA's Daily Fuel Gauge report.

In Southern California, the price jumped 20 cents a gallon overnight to $4.53 in Ventura. And in the Los Angeles-Long Beach area prices went up 19 cents to nearly $4.54. It wasn't any better to the north, as a gallon of regular gas in San Francisco averaged nearly $4.60.

In many areas, prices have jumped 40 cents in a week as refinery problems have created shortages and helped send wholesale prices soaring. Some stations ran out of gas and shut down Thursday rather than pay those costs.

Even Costco Wholesale Corp., the giant discount store chain that sells large volumes of gas, decided to close some stations

"We do not know when we will be resupplied," read a sign at one Southern California Costco, according to the Los Angeles Times.

Other gas stations charged more than $5 a gallon. The Low-P station in Calabasas charged $5.69 Thursday. The pumps bore hand-written signs reading, "We are sorry, it is not our fault," the Times said.

While gas prices have spiked around the nation, refinery outages and pipeline problems have added to woes in California.

Among the recent disruptions, an Aug. 6 fire at a Chevron Corp. refinery in Richmond left one of the region's largest refineries producing at a reduced capacity, and a Chevron pipeline that moves crude to Northern California also was shut down.

There also was a power failure that affected an Exxon Mobil Corp. refinery in Torrance, but a company spokeswoman said Friday that the refinery has resumed normal operations and would be able to meet all of its contractual commitments.

The national average for gas is about $3.79 a gallon, the highest ever for this time of year. However, gas prices in many states have started decreasing, which is typical for October.

Hawaii usually has the nation's most expensive gas, but California leapfrogged the Aloha State on Friday. The average price in Hawaii was about 8 cents a gallon less than in California.

In California, gasoline inventories are the lowest in more than 10 years — a situation made worse by the state's strict pollution limits that require a special blend of cleaner-burning gasoline during hot summer months.

The California Air Resources Board was reviewing a waiver filed by the California Independent Oil Marketers Association, which represents independent station operators, requesting that they be allowed to begin selling so-called winter blend gasoline before the scheduled Oct. 31 switch.

David Clegern, a spokesman for the air board, said there is no timeline for a decision. The California Energy Commission must review actual gas inventory to determine if there is really a shortage and assess what effect the switch would have on air quality, he said.

Patrick DeHaan, senior petroleum analyst at GasBuddy.com, said prices will keep rising because in the past week wholesale gasoline prices have jumped $1 a gallon, but average retail prices have increased only 30 cents.

"This is one of the easiest forecasts: Retail prices are going to skyrocket," DeHaan said.

The jump in wholesale prices can be particularly tough on independent gas stations that often pay more for their gas because they are not part of a larger chain.

Tom Kloza, chief oil analyst at Oil Price Information Service, said he's heard of a few California station owners shutting their pumps rather than charging the $4.90 a gallon or more necessary to break even.

"Wholesale price increases lead to retail price increases," Kloza said. "But there is some restraint among companies who do not want to exercise their current pricing power and irritate their customers."

Some analysts think prices nationally will begin to decline soon but say California could see a longer spike given its unique fuel requirements.

"Nationally, I believe most prices will wobble to and fro for the next week or so, with an eventual slow but steady attrition in retail gas prices, particularly in the Midwest and Southeast," Kloza said. "California is a wild card."

Contributing to this report were AP Energy Writers Jonathan Fahey in New York and Sandy Shore in Denver, and AP writer Juliet Williams in Sacramento.

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