California has a summer blend of gasoline in order for cars to run more efficiently and cleaner in the warmer months. This year, refiners used their market power to raise prices after the switch took place in Los Angeles. The blend is marginally more expensive to make, but not by anywhere near what LA refiners are charging their gas stations for the new blend: 37 cents more.
In fact, since San Francisco made the switch to the summer blend, prices on the street went up only four cents per gallon. LA’s a different story, which is why Consumer Watchdog warned Southern Californians to fill up last week before the change took place when we saw the wholesale prices to dealers soar.
SF Retail Gas Prices:
Since the switch on Friday (four days ago), prices on the street have spiked 20 cents per gallon, and they are still climbing. The media’s been on the case and raising questions about the oil refiners’ opportunism. Watch Tony Valdez's Fox 11 LA Midday Sunday Show, part 1 and 2, for the full explanation of the recent refiner shennanigans.
LA Retail Gas Prices:
The California Energy Commission’s supposed to be asking tough questions too, but instead wrote a blog saying that these type of price rises should be expected after a switch to the summer blend, because of the extra cost and shortage of blendstocks.
So what explains the gap between LA’s price spike and San Francisco’s steady prices if the changeover was the same? The CEC didn’t bother to address it.
The CEC claims “it is no surprise that gasoline prices have recently rebounded” and that “consumers can anticipate a small increase in gas prices.” A 20 cents per gallon average increase is no small increase, let alone the dimes more coming at the pump in days ahead.
The CEC says that gas was unusually cheap prior to the recent pump up in LA, but the truth is oil refiners were dumping their winter blend, which they had stored to keep prices at the pump high all winter. That’s why the change to summer blend took place 10 days after the usual Feb 15th switch. The pipeline company Kinder Morgan chooses the timing of the switch, and obviously refiners are driving that decision too.
So why did the Energy Commission step in to provide a half-baked answer to a large question about the gasoline market? Hundreds of millions of dollars sapped from Angelenos pockets and into the cash registers of oil refiners in the state based on a 20 cents per gallon premium is no small increase. The question begs the answer. Gas prices can go up because the Energy Commission only provides half-baked answers to tough questions about price spikes. If the pain at the pump is to stop in California, a change in perspective at the CEC is long overdue.