California gasoline prices jump, U.S. prices ease

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As if the end of summer weren’t bad enough, California motorists saw pump prices rise to new highs for the year -- with more to come -- as much of the rest of the nation saw their gasoline costs decline.

California frequently has the most expensive gasoline in the 48 contiguous states. Strict environmental standards have resulted in the nation’s cleanest blend of gasoline, and few refineries outside the state produce it. That makes California relatively isolated from the rest of the nation’s supply network and leaves it vulnerable to price spikes.

California’s average price of a gallon of regular gasoline rose 6.2 cents to $3.099 as of Monday, the Energy Department said today, a day late because of the Labor Day holiday. The latest price topped the earlier high for the year of $3.047 recorded on August 17.

Nationally, gasoline prices have been easing because of sluggish demand. On Monday, the average was $2.588, down 2.5 cents, the Energy Department said in its weekly survey of U.S. filling stations. The cheapest state in the survey was Texas, where gasoline sold for an average $2.404 a gallon.

In New York futures trading today, crude for October delivery climbed $3.08 to $71.10 a barrel as the dollar slumped. That made oil, which is priced in dollars, cheaper for foreign buyers and drove some investors to buy oil futures and other commodities.

Analysts attributed California’s price surge to a supply squeeze in the state. Production of reformulated California gasoline fell to 5.8 million barrels in the most recently reported week, ended Aug. 28, about a million barrels below the rate during the same week last year, according to the California Energy Commission.

Some of the decline comes from the slow return from maintenance shutdowns by two Northern California refineries, analysts said. Shell Oil has been overhauling a unit at its 156,400-barrel-a-day refinery in Martinez since mid-July, and Tesoro was overhauling a coking unit at its 166,000-barrel-a-day refinery, also in Martinez.

In addition, refiners have been trimming output to boost profits, said Tom Kloza, chief oil analyst for the Oil Price Information Service in Wall, N.J., who predicted that California gasoline could reach as high as $3.25 a gallon.

‘This is what happens when you have refiners who do not want a repeat of last year, when prices and their profits collapsed. They are very intent on not over-producing,” Kloza said.

The oil industry consistently maintains that gasoline prices are determined by supply, demand, competition and other factors.

“While it is accurate that California gasoline is on average higher than the U.S. average, we continue to have the highest fuel taxes in the nation,’ said Joe Sparano, president of the Western States Petroleum Assn. ‘Our regulatory agencies have told us it costs 5 to 15 cents a gallon more to make California’s cleaner burning gasoline.” The state is down to 13 refineries for its gasoline production, which can leave supply lagging behind demand, he said.

-- Ronald D. White