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Gasoline prices in California jump despite crude's drop

The average soars 25 cents to $1.988 a gallon in less than a month, the Energy Department says, while the U.S. average rises 10 cents to $1.784. Reduced production of California-grade gas is blamed.

January 13, 2009|Ronald D. White

That terrible feeling you got at the gas pump over the weekend and on Monday was real: California gasoline prices have jumped 25 cents a gallon in less than a month, the Energy Department said Monday, and seemed poised to be the first in the continental U.S. to return to $2 a gallon.

It was all the more galling to drivers and to consumer advocates because of the back story. California refineries have been increasing production of cheaper grades of gasoline that do not meet California's strict emission standards and could be sold out of state, according to weekly statistics tracked by the California Energy Commission. The refineries were also producing less California-grade gasoline.

The increase could not be blamed on the price of crude oil, which was down Monday.

Crude oil futures for February delivery fell $3.24, or 7.9%, to $37.59 a barrel. That was more than 74% below the record crude price of $147.27 in July.

The lower crude prices were the result of several factors, including the sour U.S. economy and the easing of concerns that tensions in the Middle East and Ukraine would push up costs.

"Oil prices will continue to be weak because of the economic situation here and around the world," said Phil Flynn, chief energy analyst for Alaron Trading Co. in Chicago, who added that the course might not change until some sort of broad economic stimulus package began to pull the U.S. out of its recession.

Nonetheless, California led a national jump in retail gasoline prices. The price of a gallon of self-serve regular gas in California rose 11.4 cents over the last week and by 25 cents since Dec. 15 to $1.988 a gallon, according to the Energy Department's weekly survey of gasoline stations. Nationally, prices rose 10 cents on average to $1.784 a gallon.

"It just makes me livid. It's a real hot-button issue with me. It's all a man-made bunch of manure," said Chuck Schisler, a 56-year-old Lake Forest resident and a telephone operator for the state of California.

Schisler is an avid gas-price watcher and a regular member of the volunteer army of motorists around the country who report the highest and lowest prices they see to the network of websites known as, which tracks prices in all 50 states.

"It's like every gas-station owner in this part of Orange County had a breakfast one morning and decided to jack up the price again," said Schisler, who squeezes 34 miles a gallon out of his 1999 Honda Civic.

Santa Monica-based Consumer Watchdog accused California refiners of manipulating the market to increase gasoline prices in the state.

Consumer Watchdog research director Judy Dugan pointed to California Energy Commission statistics showing refinery production of California-grade gasoline among the lowest levels in the last five years and more than 14% below 2007 rates. Overall gasoline supplies were running well below the five-year average, the state Energy Commission statistics showed.

"What is most disheartening is that they are producing more for out-of-state drivers at the expense of Californians," Dugan said.

Susanne Garfield, a spokeswoman for the California Energy Commission, said that the shift in production was relatively minor and not enough to raise concerns at this point. She noted that refiners were still turning out 857,000 barrels a day of California-grade gas in a time of lower demand compared with 89,000 barrels a day for Oregon, Nevada and Arizona.

John Felmy, chief economist for the American Petroleum Institute, said 2008 had been a horrible year for refineries nationwide, which sometimes were selling a finished product for less money per barrel than the crude oil from which it was refined.

Felmy cited the recent bankruptcy filings of Flying J, a diesel fuel distributor based in Utah, which has stopped production at a California refinery, and Lyondell Chemical of Texas as prime examples.

"Small refineries in particular are facing a huge challenge. They are running close to break-even in revenue, if not losing money," Felmy said.


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