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I have been getting numerous questions about the situation with California's surging gasoline prices. I actually predicted this price surge for California back in August, and said that it would persist into the Fall. Many have suggested an oil company conspiracy. Therefore, I want to take some time to explain what makes California's gasoline situation unique.

The EPA defines gasoline specifications, but many states have more restrictive specifications. The reasons for this are varied, but are primarily a function of the climate and the population density of an area. A cold, sparsely populated location will not suffer the same air quality issues as a warm, densely populated area and therefore those two locations may require different fuel specifications. Fuel blends that are specific to specific states are called boutique fuels.

An example of this is called the Reid Vapor Pressure (RVP) of the fuel. It can be thought of as a measure of the temperature at which a fuel boils. A fuel with a very low RVP won't be lost to the atmosphere, but if it is too low it may not properly vaporize in the car's engine. A fuel with a high RVP will evaporate more quickly -- especially in high temperatures -- and contribute to ground-level ozone and poor air quality. Specifications vary for RVP between the summer and winter. Summer fuel has a lower RVP (i.e., it is harder to vaporize, but this is compensated for by the higher summer temperature) and is more expensive to produce than winter fuel.

California has strict fuel specifications, and its fuel is produced almost exclusively by California refineries. The specifications for fuel in surrounding states are different, so California is really an island as far as their fuel production is concerned. If they have a shortage, fuel can't flow in from neighboring regions due to their more restrictive specifications. This greatly increases the risks of a supply disruption in the case of refinery problems.

Oil refining is not a lucrative business most of the time (although oil production is), so refiners don't maintain a lot of spare capacity. One key to profits in a refinery is to keep refinery utilization high, and that has been the case in California. Refineries there need to run at a high utilization in order to make money. Or, another way to put it is that the refining sector usually has such tight margins that refiners can't afford idle spare capacity. The capital that they have tied up in equipment needs to be producing, and hence there is a tight balance between supply and demand.

The August refinery fire at Chevron's (NYSE:CVX) 245,000 bbl/day Richmond refinery reduced capacity there. I addressed this issue in an August episode of R-Squared Energy TV (How Ethanol and the Chevron Refinery Fire Impact Gas Prices -- starting at the 2:50 mark), explaining why we could expect to see gasoline prices rise in California relative to the rest of the U.S. I said that I expected price spikes on the West Coast to be significantly higher than price spikes in the rest of the U.S. and that I expected California to "struggle with gasoline prices until well into the Fall."

The Chevron fire alone was enough to drive gasoline prices in California higher, but an unplanned outage at an ExxonMobil (NYSE:XOM) refinery in Torrance further crimped supplies. In a market that was already seriously constrained, this resulted in very low gasoline inventories that caused some stations to completely running out of fuel. Obviously, in a case like this gasoline prices are going to rise, and if stations are running out of fuel they are going to rise sharply.

Some have suggested a conspiracy by oil companies to drive gasoline prices up in order to help Mitt Romney win the presidency. First of all, we don't need conspiracy theories when we understand the factors involved. If some choose to believe that Chevron or ExxonMobil purposely took production offline, then they are free to believe what they want. But this belief isn't realistic. When these companies take production offline, the cost to them will be greater than the benefit from higher gasoline prices. The companies that benefit are those that did not have production problems. So when a Chevron refinery goes down, the beneficiaries are Shell (NYSE:RDS-B), BP (NYSE:BP), Tesoro (NYSE:TSO), etc. Further, does anyone really think Romney could win California? One could make a slightly more believable case if this happened in a key swing state, but not for California.

Several solutions to the gasoline shortage have been suggested, but there are no easy answers. Clearly California could benefit from more refining capacity. That's a long-term solution, but because refining is normally such a low-margin business it is unlikely that anyone is going to step forward and build one. The people calling for more refining capacity are the same people complaining about high gas prices. But the only way a new refinery would get built is if gas prices are persistently high. So it's a Catch-22: The public and politicians want lower gas prices and more refining capacity, but the former makes the latter a poor bet.

Another option would be to temporarily relax California's specifications and allow fuel to be shipped into the area from neighboring states. First, I would assume that this is not something that the governor could simply decree; that it would need to work its way through the system. Second, it would necessarily drive up prices in neighboring states. These states have recently seen some relief from high gasoline prices, but if California starts siphoning off gasoline supplies that will change. Finally, it is very possible that relaxing these specifications will lower the air quality in certain areas.

One more option is further development of alternatives, but this is also a longer term solution. The current situation will encourage more people to purchase hybrids and electric cars, and at $5/gallon biofuels like ethanol will become more attractive. Compressed natural gas (CNG) vehicles should also gain traction as a result of this crisis.

While the ExxonMobil refinery has resumed operations, another potential shortage looms as the Phillips 66 (NYSE:PSX) refinery in Los Angeles will soon undergo planned maintenance. They have announced a slight delay in this maintenance to take advantage of current high prices (and certainly to avoid criticism for taking the refinery offline during this emergency), but they can't delay it forever. This sort of maintenance takes months to plan and involves many contract workers who may have other jobs scheduled, so it likely won't be delayed for long.

The situation in California is likely to persist for years. There is no simple solution to the problem, but there are steps individuals can take. Consumers have some control over the amount they spend on fuel by avoiding gas guzzlers, taking public transportation when they can, and carpooling whenever possible. Individuals who have long commutes may benefit from purchasing a hybrid or CNG vehicle.

California provides a valuable lesson for the rest of the country, because we are not immune to the problems there. Their special circumstances simply forced these issues to manifest themselves there first. But we will see these problems crop up in other areas, and I believe eventually across the United States. As a country we need to note what is happening in California and plan accordingly.

Link to Original Article: Understanding California's Gasoline Prices

By Robert Rapier

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Comment Preferences

  •  Tip Jar (130+ / 0-)
  •  Thank you. (20+ / 0-)

    We on the left are fully capable of understanding the energy business and the reasons behind gasoline price spikes in California. The earlier diaries blaming the spike on speculators or oil companies intentionally trying to alter the election were embarrassing and required an intelligent response.

    •  LOL! (4+ / 0-)
      Recommended by:
      elwior, Calfacon, ozsea1, itzik shpitzik

      Ya, uh-huh....

      It is time to #Occupy Media.

      by lunachickie on Sun Oct 07, 2012 at 02:34:22 PM PDT

      [ Parent ]

      •  Lunachickie, if you are blaming the spikes out (2+ / 0-)
        Recommended by:
        ozsea1, lunachickie

        here on speculators and oil companies, I agree. I have not seen prices go up this dramatically since the days of gas rationing over 30 years ago.
            The temporary partial shutdown  at the Torrance refinery was merely the result of a power outage from a SCE substation. The problem has been taken care of, normal production was resumed on Friday.
            I used to work in Torrance, and such outages at the refinery were fairly common and we didn't see anything remotely like these outrageous price spikes we're seeing now.
           Richmond happened back in August, was a more serious incident, an actual refinery fire, but prices had returned to normal before this latest "incident," and were in fact dropping until last week.

           The folly of putting stock in oil companies explanations was illuminated most dramatically by BP's explanations at the time of the Deep Water Horizon incident in the Gulf of Mexico 2 years ago.
           We are being gouged, plain and simple, whatever the motivations of these characters are. If this continues, consumers/working people will need to take action in response.

          Buying the word of Exxon/Mobile as "good corporate citizens" is not something folks of clear vision ought to be doing.

        "We the People of the United States...." -U.S. Constitution

        by elwior on Sun Oct 07, 2012 at 04:09:38 PM PDT

        [ Parent ]

    •  It is refreshing to have reality (5+ / 0-)
      Recommended by:
      doc2, CalGal47, SoCalSal, Quicklund, valion

      Rather than conspiracy theories on the Rec list.  Score one for calm reasoned debate!

      Never believe your own press, never drink your own KoolAid

      by Mindful Nature on Sun Oct 07, 2012 at 03:36:23 PM PDT

      [ Parent ]

    •  here's what troubles me: (1+ / 0-)
      Recommended by:

      and I'm as guilty as any of snarking re "Big Oil wanting to depress Dem turnout in Cal" - but, seriously, something doesn't add up.

      Governor Brown decreed today that the gas stations can start selling winter grade fuel now rather than waiting til October 31.

      Response from Platts, the oil/gas industry analyst:

      Yes, our infrastructure is vulnerable. It was vulnerable last week, and last month, and last year.

      I'd be very, very surprised if prices come down as quickly as they rose...or if they come down much at all.

      Ice and certainty dissolve as we watch. Nothing else in politics matters. @RL_Miller

      by RLMiller on Sun Oct 07, 2012 at 05:05:08 PM PDT

      [ Parent ]

  •  I live in Southern California and appreciate your (14+ / 0-)

    diary. Some of my friends believe there is a conspiracy, but others had predicted, just as you did, we were going to have higher gas prices because of the fire up north and the incident in Torrance. This is a very well written diary - thank you!

  •  Great diary. (11+ / 0-)

    It's all too easy to just blame it on some wild conspiracy theories like republicans are doing with the jobs report.  Understanding Californias fuel issues requires us to dig a little deeper, as we should with the jobs numbers, to get a grip on reality.  

    To you, I'm an atheist. To God, I'm the loyal opposition.” ― Woody Allen

    by soros on Sun Oct 07, 2012 at 12:18:55 PM PDT

  •  Just pipe it in? (4+ / 0-)
    Recommended by:
    Lujane, Jay C, elwior, akeitz
    Clearly California could benefit from more refining capacity. That's a long-term solution, but because refining is normally such a low-margin business it is unlikely that anyone is going to step forward and build one. The people calling for more refining capacity are the same people complaining about high gas prices. But the only way a new refinery would get built is if gas prices are persistently high. So it's a Catch-22: The public and politicians want lower gas prices and more refining capacity, but the former makes the latter a poor bet.
    Could you build a pipeline to an existing refinery cheaper?
    What refineries are near enough to California to flex their fuel production to CA standards?  Are they already networked?

    -7.75 -4.67

    "Freedom's just another word for nothing left to lose."

    There are no Christians in foxholes.

    by Odysseus on Sun Oct 07, 2012 at 12:37:55 PM PDT

    •  Limited Access (7+ / 0-)

      There are few pipelines that come into California from the outside. Nevada has some short pipelines into California, and then there is one that comes in at the extreme southern end of the state. That pipeline originates in Texas, but it could be running at capacity. I don't know enough about that one.

      Given enough time, gasoline will start to trickle in from surrounding regions, but it won't be enough to drop gasoline prices back down to where they were before the Chevron fire. It will probably be more than six months before the California/U.S. gasoline price ratio is back to something resembling normal.

      •  This definitely is a big deal, and yeah Romney (0+ / 0-)

        might win CA. CA has voted for Republicans of Romney's stripe before (see Arnold 2003) during past energy crises. Also, an article in our Northern California paper made it clear this is having a spill over effect into Northern Nevada, which more or less imports all its gas from CA; a quick check puts gas in Reno in the 4.20s, up pretty much the same amount as CA, but probably a bit lower due to lower taxes over there.

        This also will drag down the economy because, if this lasts for more than a few days, it will come straight from the disposable income of people, cause cut backs, hiring freezes, etc.

        If Romney does what I think he'll do--show up in front of a gas station in Sacramento and call for the reserves to be released--I think the President gets put in a real bind and CA becomes an in-play state.

        I also think there is a reason to release the reserves. I am uncertain the refineries are operatic a full capacity because they're betting on price declines. So if you release say 2% of the national reserves and flood the market, they'll produce as much as they can now in order to lock in low prices, knowing they'll increase after the effect goes away. That could lower the price of gas significantly in the West. And without that kind of action from the administration, I think Nevada probably swings Romney's way.

        While I don't think this is a conspiracy per se, I do think them all having scheduled maintenance in the Spring--when the country was paying $3.30, we were paying $4.40--is fishy and I support Sen. Cantwell's call for an investigation.

        I do think we need to acknowledge the CA energy market can be games. Earlier this year, JPMorgan got caught manipulating the electricity market by CALISO, basically they were artificially causing outages to drive the price up ala Enron. If that is possible and you also managed to hedge with a bunch of gasoline futures and you know the market is already tight due to the fire, then you can cause the other big refinery to go offline due to a power outage, sell your futures for $1+ per gallon more than you bought them for and make a killing. Not saying it happened, saying it's possible and worth investigating.

        CA Air Resources Board can waive the fuel requirement. The CA legislature can instruct them to do so, and appears on the verge of a special session to do that.

        But the two actions the administration should take now are:
        1. Release 2% of the national reserves and ear mark it for the western market.
        2. Launch an investigation into the cause of the outage and see if Enron shenanigans were played.

        They do that, CA is safe and NV is still in play. They don't NV is gone and CA is a swing state.

      •  the southern pipeline is at capacity, the operator (0+ / 0-)

        has been tying to upgrade for years.....

        There is New refinery that afik has completed the permitting process but as it will be dependent on a pipeline from Mexico, From the Sea of Cortez to Yuma, and that is not far enough along for the refinery ........ though I do believe they have broken ground, that is about all so far......

        Vaya con Dios Don Alejo
        I want to die a slave to principles. Not to men.
        Emiliano Zapata

        by buddabelly on Sun Oct 07, 2012 at 05:42:24 PM PDT

        [ Parent ]

      •  Ropert - thank you for such an informative diary (0+ / 0-)

        It's nice to read some logical review of an emotional situation. There has not been a new refinery built in California since the early 1970s. The population of California at that time was 20 million, it is now 37 million. No new refinery could ever obtain a permit with current regulations so no new refineries will ever be built. There have been capacity enhancements, but we have fewer refineries now than in the 1970s. Some of the refineries have closed because they couldn't produce the boutique blends.

        "let's talk about that"

        by VClib on Mon Oct 08, 2012 at 07:40:48 PM PDT

        [ Parent ]

    •  Highly unlikely (4+ / 0-)
      Recommended by:
      ms badger, Lujane, Odysseus, wu ming

      Geography tends to prevent it. For example, there are probably refineries in Reno, NV, which is only a few miles from the state line. But just inside the state line is the Sierra Nevada mountain range. Between Reno and Las Vegas, Nevada is virtually empty.

      While there is undoubtedly refining capacity in Oregon, as far as I can tell most of it is in the Portland area, hundreds of miles away. And as is the case with Nevada, the boundary between Oregon and California is quite mountainous.

      It appears there is a small refinery in Yuma, AZ but I'm pretty sure it can just about manage to supply the needs of its own market area.

      •  Not Nevada (0+ / 0-)


        Nevada has one small crude oil refinery that produces primarily asphalt and diesel fuel. The State relies on California refineries for nearly all its transportation fuels and three petroleum product pipelines transport supply from California refining centers to the Las Vegas and Reno fuel markets.



      •  Sadly, no (5+ / 0-)

        There isn't a single petroleum refinery in Northern Nevada. Here in Reno, 100% of our gasoline is trucked in from refineries in the Bay area. 100%. The petroleum flows east here, not west.

        I suspect the situation is similar in the south. There are no sources of petroleum near Las Vegas, nor is there a port to ship it. It would surprise me if there is a refinery there. Anyway, the distance from Southern Nevada into the LA Basin is pretty far.

        And don't forget, the requirements for motor fuels in California are unique, and documented quite well in this diary. Any gasoline that was refined out of state would require extra processing in order to be sold in California.

        -5.38, -2.97
        It's too big a world to be in competition with everyone. The only person who I have to be better than is myself. - Sherman T. Potter

        by ChuckInReno on Sun Oct 07, 2012 at 02:36:18 PM PDT

        [ Parent ]

    •  Pipelines take years to build (6+ / 0-)

      Building a pipeline all the way to Texas would take years and years assuming you could get the permits in the first place.

      There is an existing crude pipeline (or was) called the All American pipeline that ran from Gaviota to West Texas.  It was built to move the heavy California crudes to Texas as there was more being produced than the refineries in CA could handle.  Last I remember it was reversed at some point but I've no idea of its current status.  google All American Pipeline to California and you'll find some old promotional material.  As I recall they lost their asses and it sat idle for years.

      But the real problem is California and the West Coast have adequate refining capacity 95%+ of the time.  There's no money in piping in products in those situations so who would build a pipe for emergencies?  Tankers can handle some of the situation, but the real issue is most of the rest of the world's refineries can't make CARB spec gas in any volume and since it takes 30+ days to make it and ship it in, you might arrive just in time to get your ass handed to you.  Been there, done that.

      There is a smallish product pipe from SoCal to AZ but I doubt it could be reversed easily or that product from that area could meet CARB spec so you're still stuck.  

      There are plenty of tankers that could move OR or WA gasoline down to CA, but since that is in reverse of the usual flow, those markets would also be short and again, those refineries up there probably can't make CARB spec either in any great amount.  It really is a tough spec.

      The only way to pop these bubbles fast is to allow import of East Coast quality gasoline and take the pollution hit.  Even then, loading a tanker spot in Houston means a delivery 3 weeks out.  It's not something one does on a whim.  

      •  And if they could get away (5+ / 0-)

        with selling more environmentally-damaging gas during this crisis, they would find a way to have a constant crisis.  Higher gas prices are hard on the poor, but they are the most effective way of getting CA to cut their fuel use.  

        Not all those who wander are lost.

        by Leftleaner on Sun Oct 07, 2012 at 03:05:19 PM PDT

        [ Parent ]

      •  Nope (3+ / 0-)
        Recommended by:
        akeitz, Odysseus, elwior

        There are not plenty of tank ships available to bring gasoline south from Washington's five refineries (one very small) and Oregon's zero refineries (Oregon has none).  Nor is there a significant surplus of gas available in the PNW region.

        The big item not mentioned in the diary is the fact that the refinery owners have old worn out equipment that they are working as hard as possible.  Most of the reports of refinery failures show equipment failure that should have been repaired or replaced years ago.

        •  Nope to your Nope (0+ / 0-)

          Chevron has several US Flagged product tankers that could move oil down.  Since they usually do the reverse, they come south empty.    But as I said, there isn't any on spec material up there that is surplus in the first place.  

          The equipment in the refineries is not as old as you make out.  While the refineries are old, they have had billions spent on maintenance in the last 20 years.  Yeah, Chevron missed a bad piece of pipe and burned up #4 CDU.  COuld have just as easily been a new weld failing.  

      •  So is that why we are over $4 in Washington State? (0+ / 0-)
  •  We all need to buy 50mph cars, it is as simple (14+ / 0-)

    as that.  We need specific subsidies in CA to help people to do that or we need to build public transportation.  We have such a car culture in CA that needs to be broken, extremely high gas prices will do that, it is a painful  solution but the only one likely to work.  

    •  That is the long (6+ / 0-)
      Recommended by:
      Lujane, eru, drewfromct, AoT, wu ming, Oh Mary Oh

      and the short of it.  We should not be talking about bringing gas prices down, but rather about how to keep them high (a $1.00/gallon gas tax would be good . . . and significantly help the State budget).  The beauty of high (a high gas tax) is that it's easy to "avoid" . . . drive less, drive slower, get a high mpg car . . .

      It's not like anyone with an IQ higher than the State Fish hasn't seen this coming for years . . . and yet people are still buying cars that can't get 25 mpg, let alone 50.  And they then drive those cars badly enough to knock off another 5 mpg.  

      (Salmo agua-bonita, or California Golden Trout, in case you were wondering . . .)


      Fake Left, Drive Right . . . not my idea of a Democrat . . .

      by Deward Hastings on Sun Oct 07, 2012 at 01:33:31 PM PDT

      [ Parent ]

      •  One thing that the governor could do immediately (4+ / 0-)
        Recommended by:
        Lujane, AoT, wu ming, Oh Mary Oh

        is impose a 55mph speed limit.  It would do two things, improve efficiency and lower accidents especially in LA.  People in LA are crappy drivers anyway and they need to be slowed down to improve reaction time(they are usually on their cell phones having completely irrelevant conversations) and putting others in jeopardy while doing it.

        •  LA Times is reporting that Gov. Brown.... (0+ / 0-)

          Just told the California EPA to relax the winter blend rule.  I guess even liberals have their price for clean air... that price must be about $6.00

        •  lakehillsliberal - I don't think the Gov can (0+ / 0-)

          do that unilaterally, except possibly in the case of a national emergency. Plus if the Dems up for re-election supported that move some of our favorites could be tossed. The public would never stand for it.

          The Gov did take a key step and is allowing the early shipment of the "winter blend" which is in storage and ready to go.

          "let's talk about that"

          by VClib on Mon Oct 08, 2012 at 07:46:20 PM PDT

          [ Parent ]

    •  Instead of artificially keeping (7+ / 0-)

      the speed down, the direction we should go is toward cars with high gas mileage at both low AND high speeds. Motorists are used to going 75 mph, and any cars that are limited to a speed of somewhere around 50 just are not going to be popular.


      Drive SLOWER. Turn engine off when you aren't driving. Plan errands all in one trip. Avoid driving at peak hours, which have congestion and wasted gas, when possible. Empty unneeded weight out of car. Have gradual acceleration and deceleration where possible. All things you can do without investing in a new vehicle. My truck is 8 years old, has 36,500 on it. I would love to get a more efficient vehicle, even though i barely drive it. But higher insurance and registration fees would more than negate any gas savings I might get.

      Oh, look.....I get a tagline. I better not waste it. I'd rather have a bottle in front of me than a frontal lobotomy.

      by sd4david on Sun Oct 07, 2012 at 03:32:40 PM PDT

      [ Parent ]

    •  Buy 50 mph cars? (0+ / 0-)

      Any political party who would propose to limit cars to 50 mph would be out of power for a generation.

      If people want to drive slower, or buy very high fuel efficient cars or hybrids, that's great.

      "let's talk about that"

      by VClib on Mon Oct 08, 2012 at 07:43:26 PM PDT

      [ Parent ]

  •  While I don't disagree with you on the following, (7+ / 0-)

    these 'solutions' are awfully simplistic:

    Consumers have some control over the amount they spend on fuel by avoiding gas guzzlers, taking public transportation when they can, and carpooling whenever possible. Individuals who have long commutes may benefit from purchasing a hybrid or CNG vehicle.
    Many people, myself included, really do have to have a larger vehicle (I am in rescue and have to be able to evacuate and transport my animals at anyu moment). Obviously, getting a smaller vehicle isn't either appropriate OR financially possible. Where I live, because of the animals, we do not have public transportation nor could I make use of it with cats/dogs in tow. I combine my trips downtown daily with trips to the vet. Carpooling is just plain out of the question.

    At one station I talked to yesterday (where $100.00 didn't even fill my tank) the price rose $0.60/gallon in four days. That is absolutely unbelieveable. Prices ranged (at same named stations like Mobil, for instance) from $4.59 to $4.79. I saw prices at others well over $5.00/gallon.

    In the richer neighborhoods, pricing is higher. In the poorer ones, the prices are lower. This isn't an availability issue it's flat-out price gouging and every time we have such a crisis I see the same thing.

    While I am not in disagreement with you on the points you made, I think it behooves us to understand that we get taken advantage of on this issue as well. It needs to be stated and it needs to stop.

    202-224-3121 to Congress in D.C. USE it! You can tell how big a person is by what it takes to discourage them. "We're not perfect, but they're nuts."--Barney Frank 01/02/2012

    by cany on Sun Oct 07, 2012 at 01:03:23 PM PDT

    •  for everyone like you who needs the larger (8+ / 0-)

      vehicle there are five more who don't. It's not about getting everyone into a ford focus (which I am happily driving at the moment). It's about making sure people are using appropriate vehicles for their needs, rather than guzzling gas in order to have a giant toy.

      The car companies are actually helping this situation quite a bit by producing some awfully nice gas-efficient traditional cars. We need better prices on hybrids, but, toyota's new line of cheaper priuses is helping too.

      So if we can get more people into the gas efficient small cars, you'll have more breathing room.

      It's the same reason we invest in public transit. Nobody expects you to haul your puppies on the bus, but if more people took the bus, it would make things easier for you.

    •  prices are why there isn't an availability issue. (1+ / 0-)
      Recommended by:

      There is only one good way a gas station owner can slow down sales when he knows there will be some time before the next tanker coming in: raise prices.

      •  Which really hurts the poor, the rich don't have (0+ / 0-)


        202-224-3121 to Congress in D.C. USE it! You can tell how big a person is by what it takes to discourage them. "We're not perfect, but they're nuts."--Barney Frank 01/02/2012

        by cany on Sun Oct 07, 2012 at 06:26:48 PM PDT

        [ Parent ]

    •  Nonsense (4+ / 0-)

      The fastest way to end the bubble in prices is for everyone to just pretend it's Carmageddon 3 state wide and just stay home for a few days.

      Knocking demand down will put things back in balance pretty quickly.  At least it will stop speculators/hoarders from grabbing gas they don't necessarily need because of fear that the price will go higher later or to grab a profit.  Nothing scares a speculator more than a lack of bids for his high priced stock.

      As for "needing" a large vehicle.  There's often a way if you look for the solution instead of complaining about the problem.  What you're discovering is the real value of gasoline when you are having to bid against everyone else for a scarce resource instead of a product in surplus.  The lesson of Peak Oil is that you will be subjected to volatile prices from here forward unless you find a way to get off gasoline.  

      Gouging is nearly impossible to prove.  What is likely is that there is simply no gasoline from the refiners left over for the independent gas stations.  Chevron certainly has none to sell and now Exxon too.  Anything that didn't have an end user's name on it, has been grabbed at higher and higher prices as stations don't want to have nothing to sell and have to sit there eating their overhead.  I'm sure a trader/speculator or two made some money, but most of the gasoline out there is owned by the refiners and their supply chains.  Sure, they could not raise their prices but when others are bidding for the oil at the wholesale price level, that's just not going to happen in the real world.

    •  relatively few people are in your situation (3+ / 0-)
      Recommended by:
      elwior, cany, Oh Mary Oh

      the vast majority of people driving huge-assed low MPG cars on the road in this state are commuters hauling 3,000+ lbs of steel around with them because it makes them feel safe and/or powerful.

    •  you don't say (1+ / 0-)
      Recommended by:
      Oh Mary Oh

      what it is you drive now that you "need", so this may not apply to you (that is, you may already be hauling your animals in a 25-30 mpg Transit Connect or high mileage light pickup with an "animal camper" in the back, and never driving over 60 mph), but . . .

      most of the people who I hear talking about their "have to have for the dogs" vehicle are talking Suburbans or Expeditions or Escalades (or even, still, the occasional Hummer) which they clearly don't need, even for the "task list" that they offer in justification for their guzzler.  There are plenty of 30+mpg vehicles out there that would do fine for hauling cats and dogs . . . I could carry more than a couple big ones in my old Scion xB (31mpg combined).  Dogs take no more room than people, and the Scion can carry four passengers (in addition to the driver) and still have room for a dog or two more in the back . . .

      Fake Left, Drive Right . . . not my idea of a Democrat . . .

      by Deward Hastings on Sun Oct 07, 2012 at 04:43:52 PM PDT

      [ Parent ]

      •  In short, you don't take their word for it, and (1+ / 0-)
        Recommended by:

        don't credit their analysis. There's always someone who knows others needs better than they do. You, in this case.

        But don't take that personally -- it's endemic.

      •  I cannot use a pickup with a shell. I live in an (0+ / 0-)

        area with very hot weather and I cannot keep the animals cool enough in this environment.

        For years I had small trucks, but we have a lot more animals, now.

        202-224-3121 to Congress in D.C. USE it! You can tell how big a person is by what it takes to discourage them. "We're not perfect, but they're nuts."--Barney Frank 01/02/2012

        by cany on Sun Oct 07, 2012 at 06:19:20 PM PDT

        [ Parent ]

      •  I have a 4runner. I have 22 cats here and 9 dogs. (0+ / 0-)

        I absolutely CANNOT have a smaller vehicle and am considering going to a van.

        202-224-3121 to Congress in D.C. USE it! You can tell how big a person is by what it takes to discourage them. "We're not perfect, but they're nuts."--Barney Frank 01/02/2012

        by cany on Sun Oct 07, 2012 at 06:20:13 PM PDT

        [ Parent ]

      •  Deward, these are rescue dogs. They aren't (1+ / 0-)
        Recommended by:

        able to travel except in crates. Five of the nine are over 80 lbs.

        I have to be able to move 9 dogs and 22 cats at any given time. I simply cannot make it work as you describe.

        It's easy, perhaps, to tell others what you think they need, but after doing this for 35 years, I'm pretty sure I have it down.

        202-224-3121 to Congress in D.C. USE it! You can tell how big a person is by what it takes to discourage them. "We're not perfect, but they're nuts."--Barney Frank 01/02/2012

        by cany on Sun Oct 07, 2012 at 06:30:45 PM PDT

        [ Parent ]

  •  I appreciate the air quality regs (20+ / 0-)

    Except for grad school in the Midwest and early career positions in Texas, I have lived my whole life in southern California.  I remember as a kid (late 50's early 60's) with my Mom driving up Hawthorne Boulevard (405 wasn't yet completed) to Inglewood to my asthma doctor appointments.  You could look to the east and the sky was dark orange because of the pollution in the air.  Because of the air quality regulations, the air in So. Cal. is vastly better now even though the population in vastly increased.

    Air regulations can be a pain for some (most) businesses, but the resultant air quality is so much better now.  If air quality hadn't improved so much, I suspect the business viability of this area would be much degraded because nobody would want to live here.

  •  if you really want to scream take a look at (4+ / 0-)

    4.00 in Stockton, 6.00 in Simi Valley!

    if a habitat is flooded, the improvement for target fishes increases by an infinite percentage...because a habitat suitability index that is even a tiny fraction of 1 is still infinitely higher than zero, which is the suitability of dry land to fishes.

    by mrsgoo on Sun Oct 07, 2012 at 01:09:41 PM PDT

  •  Transportation Costs. (2+ / 0-)
    Recommended by:
    Lujane, elwior

    I kid you not!   Asked the owner of a local gas station, why it was taking half my paycheck to fill the car up (compact, regular gas) and he told me it was 'transportation costs'.  I live in the East Bay (across from SF) and there are three (3) refineries within 15  miles of us.  Transportation cost, my derriere.

    -approaching Curmudgeonry with pleasure

    by Calfacon on Sun Oct 07, 2012 at 01:20:48 PM PDT

    •  station owners are not always the brightest bulbs (2+ / 0-)
      Recommended by:
      CalGal47, Oh Mary Oh

      If he's an independent, his next barrel might have to come from Houston, so there might be a kernel of truth in his argument.  If Chevron/Exxon/Shell simply have nothing to sell to the independents, others will have to bring in product from far over the horizon.  It's expensive and very risky.  And the barrels at the margin tend to set the price for all of the material in the market.

  •  Yucca Valley, CA gas station prices as of 6:30am (7+ / 0-)

    Friday, Oct 5, 2012

    "I cannot live without books" -- Thomas Jefferson, 1815

    by Susan Grigsby on Sun Oct 07, 2012 at 02:14:30 PM PDT

  •  Could this gas price hike in California be (2+ / 0-)
    Recommended by:
    Hockeyray, Susan from 29

    exploited by Republicans as something that is Obama's fault or do Californians know better?

    And it feels like I'm livin'in the wasteland of the free ~ Iris DeMent, 1996

    by MrJersey on Sun Oct 07, 2012 at 02:17:38 PM PDT

  •  Jerry Brown is asking to have the winter formula (3+ / 0-)
    Recommended by:
    elwior, CalGal47, SoCalSal

    brought in early. Do not see it doing much good. Jerry Brown calls for switch to winter-blend fuel to ease gas prices

    if a habitat is flooded, the improvement for target fishes increases by an infinite percentage...because a habitat suitability index that is even a tiny fraction of 1 is still infinitely higher than zero, which is the suitability of dry land to fishes.

    by mrsgoo on Sun Oct 07, 2012 at 02:48:25 PM PDT

    •  It's the most effective immediate action possible. (3+ / 0-)
      Recommended by:
      CalGal47, mrsgoo, elwior

      If warm weather persists, we'll effectively lower the air quality standard for a few weeks. If there's an early cold snap, then air quality will be unaffected.

      Part of the problem is that reserves of summer-blend were allowed to run low in anticipation of the change-over.

      Have you noticed?
      Politicians who promise LESS government
      only deliver BAD government.

      by jjohnjj on Sun Oct 07, 2012 at 03:53:05 PM PDT

      [ Parent ]

  •  my coworkers like to blame things (0+ / 0-)

    like this on the "People's Republic of California" and environmentalists.

    "Okay, until next time. Keep sending me your questions, and I will make fun of you... I mean, answer them." - Strong Bad

    by AaronInSanDiego on Sun Oct 07, 2012 at 03:35:36 PM PDT

  •  Look at it this way (1+ / 0-)
    Recommended by:

    In 1964 I was taking home about $1.50 an hour and gas was $00.25. I could get 6 gallons for an hours work. When I retired I was taking home about $28.00 an hour and gas was $4.00. I got 7 gallons of gas for an hours work. For me it's cheaper now than it was then.

    Also Europe seems to have adapted fairly well to the high prices they have been paying for decades. If necessary we will have to do it here too.

    •  I was also thinking along those lines... (1+ / 0-)
      Recommended by:

      the other day. When I first began driving in the late '60s, gas was about .35-.40, but you could buy a house then for about 10% of what you can now, so if you use the same 10 multiplier, it's still roughly the same, although I don't have any idea whether my multiplier is just anecdotal.

      FWIW, I frequently wonder whether we'd be in this situation if the gas station owners didn't go on strike in the early '70s. Not sure how many people remember the massive national carmaggedon that was caused by that strike. I swear the oil producing countries took note and decided to form OPEC based on the throttling that event had on us back then.

      I'm all for labor, and was too young to pay much attention to the issues involved, but I often wonder what things would be like if the gas station owners didn't give them a whopper of an idea.

      What separates us, divides us, and diminishes the human spirit.

      by equern on Sun Oct 07, 2012 at 06:03:57 PM PDT

      [ Parent ]

  •  the way for CA to deal with stuff like this (3+ / 0-)
    Recommended by:
    ozsea1, elwior, Dr Stankus

    is to invest in a transportation infrastructure that is oil-independent, both long-distance (electrified high speed rail), medium-distance (electrified commuter rail) and short-distance (bicycle infrastructure, dense and walkable urban development, mass transit, electric vehicles), so that as these inevitable spikes and shortages occur, they don't totally gut the family budget.

    nationally, the government could do a lot just by requiring much more fuel efficient vehicles, something CA does not have the legal authority to do, as well as kicking serious funding to the states to accomplish the list in the first paragraph. the obama admin has been the best in decades in that regard, although the money needed far outstrips the money granted to date.

    oil has peaked, both nationally and globally, and events like this will become commonplace in the short to medium run. if we do not invest in ways out of the trap today, we will be royally screwed when the gas stations run out of gas in a big way, not too long in the future.

  •  Don't change the world, Change California (0+ / 0-)

    1.  Most people are struggling these days, how exactly are they supposed to afford a new Hybrid.  I drive a 2003 4cyl Accord with 170,000 miles on it. And I intend to drive it until the engine falls out.  Most of us are looking for ways to stay afloat these days - so buying a car - used or new - ain't exactly a priority.

    2.  Higher gasoline prices are a tax on the poor and blue collar workers.  Next time, a Plumber, Building Contractor or Electrician comes out to your McMansion or condo - check out what they're driving I'm pretty sure it won't be a Chevy Volt.

    3.  Long commutes are normal for many working people.  Priced out to outlying areas they can't afford to be in Manhattan or San Fran to give their families the quality of life they want.  In my own experience -- a good school district, a bit of yard and more affordable taxes added 20 miles to my former daily commute -- we shouldn't be taking this away from people.

    4.  If California wants to avoid these problems, then the obvious and simple solution is to address supply.  If you can't build more refineries because profit margins don't exist then you, either, need to change the mixture of gasoline so Cali can import fuel from other states more easily; or have an escape clause that allows the use of out of state fuels under certain conditions.

    5.  Finally there is one more choice - you can move to Texas like I am.  Gas is about $3.30/gallon there.

    Happy motoring!

  •  As a Californian who still drives... (1+ / 0-)
    Recommended by:

    a little Scion, Thanks for the explanation.

    What do we want? Universal health care! When do we want it? Now!

    by cagernant on Sun Oct 07, 2012 at 04:12:49 PM PDT

  •  I see how the independents bid up the price (2+ / 0-)
    Recommended by:
    ozsea1, elwior

    in the wholesale spot market. But why do the OilCo franchise stations - who buy on long-term contracts - raise prices at the same time?

    Answer: Because they can.

    I suspect that all gas stations make their profit from the convenience store sales, and are willing to sell fuel at a loss to keep the customers coming in for the Pepsi and Cheetos. When there's no need to undersell the competition, why not take the windfall at the pump too?

    When shortages occur, the choice is either higher prices or rationing... we could all help by "rationing" our purchases to a two or three days' worth of fuel. Demand reduction leaves more fuel in the market, and that brings down prices.

    The big question is this: how do we make the system more robust at least expense. Should the state build and subsidize a "peaker plant" refinery to provide backup capacity? Should consumers set some cash aside in a "rainy day fund" for the next price spiral? Should the air quality regs be made more flexible? Maybe tax credits to encourage refiners to keep additional gasoline inventory on hand?

    Have you noticed?
    Politicians who promise LESS government
    only deliver BAD government.

    by jjohnjj on Sun Oct 07, 2012 at 04:18:33 PM PDT

    •  Oil refineries (0+ / 0-)

      Cannot realistically operate like peaker plants.  They take far too long to start up.  But California could maintain a reserve of gasoline, jet fuel, and diesel fuel that is released during supply disruptions.

      •  Agree. I was thinking along the lines of a plant (0+ / 0-)

        that idles along at a small financial loss or break-even capacity. When the private sector fumbles the ball and prices get too high, the "public utility" refinery can ramp up production and boost supply.

        I can imagine two refineries (NorCal and SoCal) operated as a co-op by the State and local governments to provide fuel for public agency vehicles. Without the need to pay dividends to shareholders, it could possibly supply fuel to cities and counties at competitive prices, while still maintaining reserve capacity.

        But it might be easier for the government to pay  privately-owned refineries for reserve capacity and inventory, in the form of tax breaks.

        Have you noticed?
        Politicians who promise LESS government
        only deliver BAD government.

        by jjohnjj on Fri Oct 12, 2012 at 02:14:18 PM PDT

        [ Parent ]

  •  Baby Jeezuz on a pogo stick !!! (1+ / 0-)
    Recommended by:

    First off, I concur with this:

    Lunachickie, if you are blaming the spikes out (0+ / 0-)
    here on speculators and oil companies, I agree. I have not seen prices go up this dramatically since the days of gas rationing over 30 years ago.
    Secondly, as if the enablers and "explainers" need reminding:


    And Forbes, that liberal rag, sez....

    I've lived in Washington State for thirty-four years, the oil companies have been singing this same ol' tired bullshit song over and over and over again.

    Not impressed with this oil company fluffing. Sad and maddening.

    The "extreme wing" of the Democratic Party is the wing that is hell-bent on protecting the banks and credit card companies. ~ Kos

    by ozsea1 on Sun Oct 07, 2012 at 04:31:40 PM PDT

  •  Thank you (3+ / 0-)
    Recommended by:
    equern, SoCalSal, Robert Rapier

    As a California resident who works in the oil industry, it's refreshing to see a reality-based diary on this subject.   As a progressive Democrat, it embarrasses me when some on the left undermine DK with conspiracy theories.  They have the same reckless disconnect from reality as the wingnuts over at RedState.

    There aren't going to be more oil refineries built in California.  The business case doesn't exist.  

    Instead, in the coming years the most inefficient oil refineries in California and the rest of North America (and Europe, and Australia, and...) will be shutting down -- a continuation of a trend that began years ago.  They cannot afford to keep operating.  With the public favoring more efficient vehicles in their purchases, and increasingly stringent fuel efficiency mandates, the demand for gasoline will continue to decrease.  Fewer oil refineries will be needed.  The big money is in oil exploration and production, not in oil refining.

    If California wants to protect its residents against price shocks from supply disruptions, then some options to consider include:

    1.  California could create a strategic fuel reserve, with gasoline, jet fuel, and diesel fuel.  If we had that now, and gasoline was released from the reserve, then retail gasoline prices would drop -- a lot.  The mere existence of the reserve might mitigate the price increases.

    2.  California could temporarily relax its fuels specifications, and allow EPA spec fuels to be sold.

    3.  California could temporarily relax its fuels specifications to allow things like winter formulation gasoline to be sold in the summer gasoline season -- a move that Governor Brown just proposed.

    4.  California could revisit whether our unique fuels specifications are still needed.  When these specs came into being in the 1990s, California led the way in mandating cleaner fuels.  But EPA fuels specs got increasingly stringent in recent years, so it's worth rethinking whether our fuels specs still make sense.

  •  I particularly like the winter/summer proposal! (0+ / 0-)

    That would seem to make good sense given the current situation.

    One additional thought...couldn't California be given relief by the national reserve?


    What separates us, divides us, and diminishes the human spirit.

    by equern on Sun Oct 07, 2012 at 05:50:54 PM PDT

  •  In August of 2007 crude sold for $145.50 and (0+ / 0-)

    gas was not anywhere near the price now.  Now crude it is at $88 and you still think there is no conspiracy?

    •  well (1+ / 0-)
      Recommended by:

      you've cherry picked the price of oil for a time when it had peaked sky high due to spot market speculation.

      it's not like the price of oil goes up and then gasoline immediately goes up. there are other factors, not least of which is that the spot market for crude is much more sensitive and volatile than the price of gasoline at the pump.

      but by all means, conspiracy.

    •  Apples and Oranges (2+ / 0-)
      Recommended by:
      Oh Mary Oh, Dr Stankus

      2007 was a very brief price spike, the market's reaction to a globally constrained supply of crude oil.   The price of gasoline at the pump lags crude oil price increases, and it never had a chance to catch up to that spike because it was so brief.  Oil refining capacity was not the problem in 2007.

      California's current problem is constrained oil refining capacity from a combination of the fire at Chevron's Richmond Refinery, the power failure at ExxonMobil's Torrance Refinery, and a crude oil pipeline that had to be shutdown due to harmful concentrations of organic chloride.  All of this is exacerbated by California's decision to have its own unique fuel specifications.

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