14 Sep 2014
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Gas Prices May Be About to Retreat

Feinstein suspects ' illegal short squeeze.' Brown orders switch to winter-blend fuel.

Gas Prices May Be About to Retreat

California's senior senator Sunday charged that California's record gasoline prices may be the "results of an illegal short squeeze" engineered by the handful of companies that refine gas here.

Meanwhile, Governor Jerry Brown ordered California smog regulators to allow winter-blend gasoline to be sold in California this month, a move intended to reverse a sudden scare in the wholesale gasoline market that saw prices shoot up nearly 50 cents a gallon in six days.

In the Los Angeles market, the average price Sunday went up nearly 4 cents, to another record level: $4.696. The Orange County price average was one cent less, and also at a new record for the second straight day.

In a letter to the Federal Trade Commission (FTC), Sen. Dianne Feinstein, cited news reports that said Tesoro Corporation -- whose refinery in the South Bay went down for maintenance -- was taken advantage of by other gas suppliers "either through collusion or the use of market power."

"Publicly available data appears to confirm that market fundamentals are not to blame for rising gas prices in California," the California democrat wrote in a letter to FTC chairman Jon Leibowitz.

Feinstein also called on the FTC to monitor energy price and production data gathered by other government agencies, to watch for "fraud, manipulation or other malicious trading practices."

She also urged the FTC to establish a permanent gas and oil oversight market committee, similar to the Federal Energy Regulatory Commission's oversight of the natural gas and electricity markets.

The governor ordered the California Air Resources Board (CARB) to allow refiners and gas stations to roll out the winter blend before its previously- scheduled Oct. 31 sales date, an action the governor said will increase gas supplies up to 8-10 percent, "with only negligible air quality impacts."

In a letter, the governor said the market variations were imposing "unacceptable cost impacts on consumers and small businesses." This, he said, was threatening "significant economic disruption, and serious harm to public safety and welfare."

An analyst said California's wholesale gasoline market has gone "into a panic about the adequacy of California fuel supplies" Jeffrey Spring of the Automobile Club of Southern California said the market disruption followed a power failure at the ExxonMobil Torrance Refinery and closure of a Chevron pipeline that moves crude oil to Northern California last Monday.

Other pressure on the state's gas market includes local refineries dropping production levels, energy companies exporting fuel to Mexico and other countries, and allowing inventory to dwindle in anticipation of switching over to production of winter blend gasoline, Spring said.     

"I am directing the Air Resources Board immediately to take whatever steps are necessary to allow for an early  transition to winter-blend gasoline" to be sold in California, the governor said in a letter to Mary Nichols, his appointed head of the CARB.

Some clean air advocates had worried that such a move would hurt air quality in October, which is one of the hottest months in coastal California due to Santa Ana windstorms and other seasonal weather fluctuations.

The governor said Sunday that winter gas evaporates more quickly than summer blend, which takes longer to evaporate and is better during the smoggiest months of the year in the summer.

Brown said he expected gas prices to settle down, now that the ExxonMobil refinery in Torrance has resumed operations following an electricity outage last week. The Tesoro refinery in the South Bay is expected to resume production next week, after its maintenance shutdown.

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