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.

Oct 5, 2012 6:40PM
The Big Oil **** are just jacking up prices to munipulate the election to get Dems out of office so they can get **** kissing Republicans in office
Oct 5, 2012 6:38PM
The gas price is here because we have a "corrupt" Congress that allows big oil to remain unregulated and receive corporate welfare after making record profits.  Where is the outrage here?   First thing the do nothing Congress has to do is eliminate big oil's subsidies.  Romney, the flip flopping clown supports big oil, who is one of his big supporters for his campaign for President.  Another reason it will be difficult to do is because several members of the GOP in Congress receive fat paychecks in the form of political contributions from the oil behemoths.
Oct 5, 2012 6:37PM
Its the latter (speculation) and our **** leaders just stand aside and let the gougin begin...likely because their getting what would be tantamount to 'hidden' tax increases.
Oct 5, 2012 6:33PM
It's a whole new America!  We now have to stand in line behind those better than us.  It's not really that great a country anymore.  Have you seen how a lot of the rest of world is living?  Look at the glitter in Dubai, Singapore, Hong Kong, Berlin, nauseam.  The only people living better in this country than ever before are the politician and the CEOs.  Only for them is this a great country.  For the rest of the mathematically challenged, functionally illiterate, utterly sad Americans, things are just going to get worse.  A lot of you can't even afford homes anymore, those that have them mostly paid too much for them, interest rates can't go up or the housing market will never recover,  gas prices are soon going to rival European prices with only a third of the taxes that Europeans pay per liter, yada yada yada...the party's over.  Don't wait for retirement, most won't get one.  Get use to it.
Oct 5, 2012 6:28PM
Next year at this time 5 bucks a gallon may be the norm and thats not figuring in the attack on Iran by Israel after the election ! Get ready, dump  yer gas guzzla now !
Oct 5, 2012 6:16PM
Gas was $3.77 gal. at Wal-Mart today for regular, and people were lined up in the parking lot.
If you have a Wal-Mart card, you can save 10 cents a gallon.

Oct 5, 2012 6:12PM

Guys, I do not know how we are going to survive but with tension brewing on the horizon, it could only get worse. I do not know for you guys but since I have gotten a fuel saving device from I have gotten some form of relief as it pertains to my fuel expense. I have recently noticed some people had gotten a 25 and 30 miles additional miles on their fuel.

The driving conditions on the island can be compared to as city like condition. Check it out for your self. 

Oct 5, 2012 6:12PM
I just saw $3.61/gal put up on the board today here in central FL. I smile a little bit because I get to ride by the gas station on my bicycle, but then again this is probably just because I can't afford a car. Sure, you can say i'm "green", but I put my life on the line when I go to work everyday riding downtown on a bicycle. Gas prices have drastically changed my life ever since 2008. My old 1966 truck has been parked ever since due to the prices and it even gets the same mileage as a brand new truck. Just saying, something has to change. Fuel efficient vehicles need to be made more affordable or gas prices need to come down. I think everyone can agree that $4/gal is disrepectful to the average American that has to leave their low-wage paying job at the end of the day and dig deep into their wallet to pay for gas.
Oct 5, 2012 6:06PM
This headline is bogus, since Monday, (in the Los Angeles area) gas has gone up 41 cents a gallon ! There is no justification for this, the 'news' reports gas prices have risen because of an oil refinery fire here, I say bullsh*&t. Do they not have enough in reserves? Is there not gas coming down from the pipeline we built in the 70's? What about pulling the oil out of the ground in THIS country, oh...wait we can't do that because Kissinger brokered a deal with the OAE in the 70's, what was I thinking? When the hell are we going to rise up and say "enough is enough"! When it's 8 bux a gallon? How much longer are we going to let them screw us? It is common knowledge that under just three states in the U.S. there is many, many more times the oil in the ground than the middle east could ever hope to have. Thank you Mr. Kissinger.
Oct 5, 2012 6:02PM

Thats ok My new chevy volt has 107 miles on .04 gallon of gas, folks the volt only goes 25-50 miles on a charge in 2013 then it switches to gas at 40 mpg. the range is about 350 miles on a tank. I have been driving the car for a week now on .04 gallon of gas. i am so impressed with the car, it cost about$ 2,75 dollars and cents to charge it so far.  The volt is absolutly the wave of the future. They are in the process of aquiring 100 miles between charges, It makes me feel good to drive right by the gas stations every day. my comute is 12 miles each way. I cannot say enough about the goudging going on at the pumps. We now have a choice, I advise everyone to check out the new electric cars, the power is tremondous. I will not be buying gas anytime soon. All of my gas rigs are now parked. What a great feeling it is.

Oct 5, 2012 6:01PM
Looks like Mr. Big Shot should have built a few government owned refineries to sell gas to the people with the 500 million he loaned to that bankrupt solar company. No hope. Wake up voters. Vote for Libertarian Gary Johnson. Unless of course you are NOT fed up. I am.
Oct 5, 2012 5:57PM
Why are people blaming President Obama?  If there is one person in this country that has no control over gas prices, it is the President, no matter who that is.  People don't realize that a President has very little affect on the economy, especially when the Congress is held by the other party and they have stated, on the floor of Congree, that they will vote down any legislature no matter how much good it would do, if that would help them win the next election.  You really want these people in power? 
Oct 5, 2012 5:57PM
I think you are missing the real issue here. Oil is priced in dollars (for now) and with QE 1,2, and now forever this is inflationary pressure, plain and simple. How much was oil the last time gas was this high? A LOT more, in dollars that is.
Oct 5, 2012 5:50PM

I live in Eastern North Carolina.  The price of gas here has dropped about 10 cents in a week.  I think I paid $3.62 yesterday at Sam's Club which runs about 2 to 5 cents cheaper than the other places.  California voters wanted to be able to have their own referendums on the ballot with few restrictions.  They got it and they have done as much if not more than the legislature to ruin their economy.  They keep voting for the government to give them more and won't let the legislature raise taxes on property or make other changes that are needed.  You reap what you sow.

Oct 5, 2012 5:48PM
Crude oil should never have been put in the commodoties market. All they do is artificially inflate prices.
Oct 5, 2012 5:42PM
$4 a gallon gas isn't so cool when you are trying to get re-elected. It was cool 4 years ago when Mr. big shot was the challenger. How do you like it now?
Oct 5, 2012 5:38PM

It is essential that oil speculation be reined in both at the state and federal levels if California and many

other states are to remain viable.  Also CARB has really gotten out of hand.  I realize that clean air is

essential, however, living is essential too.  In too many cases, the cure often turns out to be more

devestating than the deasease.  CARB, SCAQMD, and other similar beauacracies have all too well

illustrated this fact.  They are all going way overboard and have become way too overzealous with

too many burdensome clean air regulations.  While some of us have the ability to pull up stakes and

move to another state, too many of us don't.  We're stuck here with these very unreasonable and

very very unfair bearuacracies.  We're being unneccessarily sacraficed for the "greater good of this

state".  It is essential that the state lighten up on little people like us, if it is to flourish, or even to


Oct 5, 2012 5:37PM

Speedway price just jumped thiry cents a gallon in Detroit today.

Was headed towards $3.50 a gallon, then a new excuse came up.

Oct 5, 2012 5:37PM
Come on guys, remember in 2008 when Obama was preaching to reduce our need for foreign oil by creating more wind, solar, and natural gas.....Oh wait, that hasn't happened yet.  Maybe he should start preaching again so he can get re-elected.
Oct 5, 2012 5:34PM
maybe the price of gas should be regulated like in Canada!
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