California crisis means $4 gas for a while

Refinery problems and speculative bets keep pressure on pumps nationwide.

By Jason Notte Oct 5, 2012 1:40PM

Gas prices in California rose as much as 20 cents per gallon between Thursday night and Friday morning, and the state's fuel shortage is just one reason U.S. gas prices will flirt with $4 for a while.


The average price of a gallon of regular gasoline in California is nearly $4.49, according to the AAA Daily Fuel Gauge Report. That's the highest in the country and far exceeds the roughly $3.89-a-gallon national average reported by the Energy Information Administration -- still a record for this time of year.


If you own an Exxon-Mobil (XOM) station near San Francisco, your prices are likely closer to $4.60. Even high-volume Costco (COST) gas stations can't offer any relief, as the Los Angeles Times reported that the big-box retailer had to shut down some of its pumps.


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


In some areas of the car-happy state, prices have jumped 40 cents in a week as refinery problems have created shortages and helped send wholesale prices soaring. Among the recent disruptions, an Aug. 6 fire at a Chevron (CVX) refinery in Richmond has one of the region's largest refineries producing at reduced capacity. A power failure in Southern California has affected an Exxon Mobil refinery, and a Chevron pipeline that moves crude to Northern California also was shut down.


Image, buying gas, copyright moodboard, Corbis, CorbisWhile all of the above is putting pressure on California pumps, other forces far beyond the state's borders are fueling price increases and a sticky nationwide slide from $4 a gallon. There hasn't been a refinery built in the U.S. since 1976, which means each time one goes offline for a bit or shuts down, the gap between crude oil and gasoline supplies widens. Commodities brokers know this all too well and are starting to place huge bets on commodities futures as peak winter heating demand nears.


As noted by Fortune, a recently released United Nations report explicitly states that the "financialization" of commodities markets -- "hundreds of billions of dollars of bets placed on expectations of temporarily rising prices" for energy, food and other goods -- is the "root cause" of elevated prices. That's right, a bunch of folks sitting at home barking orders to traders as if it were a scene from "Trading Places" helped boost gasoline prices, which in turn pushed this summer's global oil prices 65% higher than the averages reached during the commodity price boom of 2003 to 2008.


"Investors treat commodities as an asset class, which means that they are betting on a certain price trend during the period they are invested in commodity assets," the UN said. "They do not trade systematically on the basis of fundamental supply and demand relationships in single markets, even if shocks in those markets may influence their behavior temporarily."


In a fuel market in which drivers already think prices are headed toward $5 a gallon, commodities brokers and investors aren't just potentially funneling populist anger away from fuel companies and toward Wall Street. They're building that anger a pipeline.


224Comments
Oct 5, 2012 4:41PM
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How come when oil was $145 a barrel, gas was $4 a gallon.  Now, oil is $90 a barrel, but gas is $4 a gallon.  "Lucy, you got some 'splaining to do".
Oct 5, 2012 4:44PM
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Meanwhile gas sells for .24 cents a gallon in Venezuela while our government sends Chavez more money in government aid. Hey Hugo why don't you lets us federalize Citgo for you.

 

Oct 5, 2012 4:47PM
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"There hasn't been a refinery built in the U.S. since 1976." Wow, thanks to our wonderful regulations, we're screwed.
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Ok this is what see, there will be no recovery, The employment increase is a lie, or is it that more jobs opened up for our imagration people who send all their money else where and can live 20 in a house and after they have sent so much home they follow as well, note to self not helping the economy, next is the fact that one or two refineries really don't make a difference in how much gas is refined as there are many every where but we as cattle are led to believe this is the last one (OMG what will we do?) Lies, Lies, and more fearful lies. I am left wondering at what point do we the people take our country and everything in it back. because we are just a SO TO SPEAK paycheck away from being a third world country  and our middle class is a thing of the past. Foolish, Foolish Americans,(To Include Myself) we no longer know how to fight for what's our. Very sad.
Oct 5, 2012 2:39PM
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I had to take a job where I drive 85 miles round trip everyday and this is killing me. It was bad enough that I had to take a huge paycut after being unemployed for a long time and not able to find work closer to home then gas prices go thru the ceiling. Two mornings ago I paid $4.49/gal for premium, have to use that grade in my Jetta, then in one day it went up to $4.73, ridiculous! So am making $15.50/hour and pay about $400/month for gas just for work. That isn't counting if I go out, which I've seriously cut down on.

 

Now, is it our fault that a fire broke out at the refinery in WA because there was not enough protection to prevent it? Is it our fault there was a power outage at the refinery in SoCal and that they didn't have preventative measures in place for back up power? I don't know what's behind the closure of the crude pipeline to NoCal so wont' comment on that. Now we know that Exxon-Mobil is going to file claims w/their insurance carriers so they're covered for their losses, who do we go to to recover our losses from these BS high prices??

 

As I've said for many years, this country is RIPE FOR A REVOLUTION!

 

That's all I got to say.

Oct 5, 2012 4:31PM
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Hello...I used to work for one of the largest oil companies in America.  The gas you are buying now was taken out of the ground about two years ago and hit the refineries a year ago. The companies keep dragging out that tired old story "oh, we had a power outage at a refinery" excuse.  Bottom line is the execs want a nice Christmas bonus.  Greed, greed and more greed.  And don't think for a second that none of that money is going to Washington DC.  They're called PAC's and they throw tons of money at their elected minions.  Not much you can do but bend over and grab your ankles.
Oct 5, 2012 4:47PM
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What a bunch of bull&*(( IF I FART THE WRONG WAY GAS GOES UP!!
Oct 5, 2012 3:26PM
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I bet by tomorrow every gas station across the US will jack their prices up by 20 cents a gallon just because CA did

Oct 5, 2012 2:33PM
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Refinery problems?  What a crock of crap?   Just say what the real reason is than covering for the corrupt oil companies.  They continue to make feeble excuses.  They are price gouging the American public and the do nothing Congress just stands idle by while the rest of us take more money out of wallets each week to pay for it.  The time has come to regulate big oil, strip them of their subsidies.  Enough of this crap already. 
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There is no oil shortage, gas price's are the fault of wall street speculators and they control the oil price's. We bailed these ****'s out when they went broke, then they turn around and get 40 million dollars for a bonus. We need to tax bonus pay outs like this to 75% like France. We have refinerie's here on the west coast and pay more for gas then places like Wyominy where it cost to truck gas there yet they pay half of what we pay with out any trucking.
Oct 5, 2012 5:24PM
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When are the majority of you who blame this on the past and current presidents going to realize... this is not about who is elected into office, it's about control on a much grander scale. Whether it's Bush, Obama or Romney, they all have been and are puppets to the financial pyramid that's been labeled the New World Order.

If all you can do is complain and point fingers on this forum, then you are no better than the people in power who make us fight amongst ourselves. Get a grip, come together, and do something about it. That is all.
Oct 5, 2012 5:13PM
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we heard it coming several months ago when blow bama said we should be paying what Europeans are paying for gas. ALL of the politicians who are currently seated in Washington should be ousted and replaced with people who have no ties there. let them all know we have the power to control how they vote with ours. there is never a reason for our gas price to be this high other than corporate greed and price gouging. USA is the 4th largest exporter of crude! get that! we need to keep it and our foreign aid money here and take care of our economy and home folks first and foremost..  to HELL with opec and the jihadist countries that don't like our freedoms. how come so many of them want to come here or want to change our way of living? It's time we quit worrying about all the others and do what it takes to get America back on track and in focus with GOD!

 

Oct 5, 2012 2:34PM
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California stays in the CRISIS mode. 
Oct 5, 2012 4:58PM
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I just love how our euro friends try to compare their fuel prices and ours.  Hey folks you are paying for insurance and a whole lot of other socialist programs with your fuel prices we are just getting raked! 
Oct 5, 2012 2:39PM
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Dont you mean 5 Dollar gas ... is time to protest
Oct 5, 2012 2:38PM
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The oil companies control supply, manipulate prices to their advantage, are allowed to export a good amount of oil overseas for greater profits and continue to receive corporate welfare. What an outrage!!!  They make record profits and have this nation by the gonads.   We need to take this country back from the robber barons of the 21st century.  Time has come to regulate big oil, the Speculators, and throw the corrupt bums out of Congress who do not want to serve the interests of the people in this country.
Oct 5, 2012 3:15PM
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Didn't Obama say he would get to the bottom of the price gouging in gasoline prices? A lot of lip service. Meanwhile, in my neck of the woods, propane has gone down from $2.80 to $1.60 per gallon in the past 6 months. That's why my truck burns propane. I don't get why there aren't more propane powered vehicles on the road.
Oct 5, 2012 3:59PM
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"There hasn't been a refinery built in the U.S. since 1976"

 

I notice in these types of articles that there is never any mention of the 25%-30% of refineries which were SHUT DOWN to create a "shortage" and raise prices when good old Ronald Reagan deregulated the industry back in the 1980's!

 

If anyone gave it more than 5 minutes thought, they would come to the realization that the oil and gas industry is nothing more than an unregulated public utility.  Or course nothing will change as long as poiltitians can be bought and paid for!

Oct 5, 2012 5:48PM
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Crude oil should never have been put in the commodoties market. All they do is artificially inflate prices.
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