California crisis means $4 gas for a while
Refinery problems and speculative bets keep pressure on pumps nationwide.
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.
While 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.
"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!
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.
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.
Isn't this exactly what the fossil fuel haters and the conservation crowd wants?
I bet by tomorrow every gas station across the US will jack their prices up by 20 cents a gallon just because CA did
I see nobody here is familiar with Peak Oil.
Can't say I'm surprised.
Copyright © 2014 Microsoft. All rights reserved.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.