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.


220Comments
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 3:59PM
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OIL MAN STATED    " WE have to make money for our STOCK HOLDERS" greed greed GREED  at our expense  and they laugh all the way to the BANK 
Oct 5, 2012 3:53PM
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It's a fact the US exports more oil than it imports. We cannot use our oil here because it has a high sulfur content and our environmental laws dictate that we cannot use it for that reason. And even then, we import more oil from Canada, YES Canada, than all the OPEC nations combined. So, do we put up with air pollution and lower the price of gasoline or pay dearly for clean air? But think about it, if we sell to the highest bidder on the free market, do you think THEY care ifthey're polluting the atmosphere? I think not.  
Oct 5, 2012 3:50PM
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The Gas is high because the oil companies and bigoil tycoons want O bama out.  If I was the Saudies I would wake and smell the roses because they will be manipulated and trouble will revert back to the middle east --the oilboys want to keep the old "bush statis quo: and the oil people and companies wiull continue to fleece the American People as well as othercountrie --they do not wa nt clean or green energy-so if Obama wins (gas will go down for awhile but will resurface 2015.  If you follow the $$, you will get to know the whole story.
Oct 5, 2012 3:48PM
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In another article today it said gas prices in Venezuela are .24 cents a gallon.  They have a huge surplus.  The government sets the prices.  The problem with that is now in Venezuela most people own cars and traffic is horrible.  Why can't our government set the prices for example $2.00 a gallon?  This would help the economy tremendously and create jobs.  I don't think much of Hugo Chavez as the president of Venezuela but his gas prices are great!
Oct 5, 2012 3:41PM
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Add to the mix the Fed printing money the dollar falling against the euro = higher prices.
Oct 5, 2012 3:41PM
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This **** has been going on for years now . big oil charges as much as they want to charge.there is no real reason ? its just some made up **** that the oil companies come up with. nobody is looking out for us .it seems some movers and shakers would have surfaced by now with a plan to compete with the big oil shakedown of American motorist .but there hasn't been .so that only tells me some folks in high positions are getting a lot of kickback . some big payola is being distributed around . what else makes sense .
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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 3:40PM
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It always amazes me that they come with the national average on gas prices. I live in California and we are about 28 miles from the Oregon border on the coast and we get screwed all the time. Yesterday it went up 30 cents to 4.77 and someone else in town told me that they paid 4.80 something. They tell us that the reason we pay such a higher price is that they have to truck up here to us. Maybe stupid people believe that and that is why we go over the border to buy gas. We can go south and for a while it is maybe 2 cents lower till we get closer to Oakland and we were making that trip every week due to our grandson having Leukemia. Thank God the car gets good gas mileage.
Oct 5, 2012 3:39PM
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Stock market goes up - gas prices go up
Oct 5, 2012 3:38PM
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SICKENING!!!!!!!!! And we supposedly have a surplus of energy/oil in this country??
Oct 5, 2012 3:37PM
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NIETHER OF THE CANDIDATES COULD GIVE A **** LESS ABOUT THE PRICE OF GAS, SPECULAT0RS ,THE MIDDLE CLASS OR ANY CLASS FOR THAT MATTER. THE ONLY INTEREST IS IN WINNING AND FORWARDING THE AGENDA OF THE REPUBLICAN OR DEMOCRATIC PARTY. FUNNY THOUGH HOW THE LOUDEST SOUND YOU HERE FROM ANY POLITICIAN IS DEAFENING SILENCE.
Oct 5, 2012 3:36PM
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Since so many want President Obama to control the price of

gasoline, maybe he should order the speed limit reduced to

55 mph as President Nixon did, inspite of the fact that he doesn't

own any oil wells or refineries. Also propane in Maryland costs

4.00 a gallon.

Oct 5, 2012 3:31PM
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Gas has went up every 1 and half years for the last 39 years no matter who`s in the WH.Gas

is a political football.In 2008 gas was $4 all over this great country.We are just one player

on the world market.

Oct 5, 2012 3:30PM
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Isn't this exactly what the fossil fuel haters and the conservation crowd wants?

 

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 3:26PM
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I see nobody here is familiar with Peak Oil.

 

Can't say I'm surprised.

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gas is gas there all crooks dont care who is in office not going to fix the problem the only thing about the word blend is when it comes out of my pocket
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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.
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