End Of Road For Bargain California Gas Prices

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America's long holiday at the gas pump has come to an end, with prices finally rising after seven months of steady decline.

And in California, they're starting to soar.

The state's average cost for a gallon of regular gasoline has jumped 36 cents since the end of January, reaching $2.79 on Monday, according to GasBuddy.com. Prices are rising throughout the country, but not as quickly, with the national average climbing 20 cents this month to hit $2.25.

In part, gas is following oil's lead. After the global oil market collapsed last year, plunging from above $100 per barrel, prices have finally started moving higher. Oil futures traded on the New York Mercantile Exchange bottomed out at $44.53 on Jan. 29 and have since risen to $52.78 on Friday.

For California, however, oil's rebound came at a bad time.

California's gas prices usually rise in February, as the state's refineries cut production, perform maintenance and switch to making fuel blends designed for use in warm weather. And this year brought an added complication. A nationwide strike by refinery workers with the United Steelworkers union prompted Tesoro Corp. to close its Martinez refinery, the state's fourth largest.

That decision knocked out 8 percent of the state's refining capacity. Other refineries hit by the strike, both in California and elsewhere, have continued operating.

Priciest in the U.S.

"The Tesoro refinery being down certainly plays a part, but there are other factors as well," said Denton Cinquegrana, chief oil analyst with the Oil Price Information Service. "California's certainly zooming higher than the rest of the country, and that's not uncommon at this time of year."

He noted that despite the steep increase, gas prices in California and nationwide remain far below the levels that drivers endured for most of the past five years. From September 2010 until December 2014, the Golden State's average for regular gas never dipped below $3, according to data from the U.S. Energy Information Administration. Four-dollar gas became the norm.

"Those prices that we got used to in 2011, 2012, 2013 – I don't see those coming back anytime soon," Cinquegrana said.

Californians typically pay some of the country's highest gas prices, the result of hefty taxes and the unique, isolated nature of the state's gasoline market.

California uses its own pollution-fighting fuel blends not found in other states. As a result, almost all of the state's gasoline is made by 14 refineries within California's borders. Problems at the refineries – power failures, fires, broken equipment – have caused frequent price spikes.

They've also created a lingering suspicion among consumer advocates that oil companies sometimes restrict gas supplies on purpose to drive up the price, much as some power plant operators did during California's electricity crisis of 2000 and 2001. State investigations of the refineries, however, have consistently failed to find evidence of wrongdoing.

Still, Tesoro's decision to close its Martinez refinery revived those accusations. The nonprofit group Consumer Watchdog, a frequent scourge of the oil industry, has asked state Attorney General Kamala Harris to investigate whether Tesoro chose to stop production as a way to squeeze consumers.

"We question Tesoro's decision to fully shut the plant when it was possible to keep partially operating," said Liza Tucker, one of the group's consumer advocates. "Taking the refinery offline is a great way to help boost gas prices."

Tesoro, based in San Antonio, rejects that notion, saying that closing the facility was the safest thing to do under the circumstances. According to the United Steelworkers union, 420 of the refinery's roughly 650 employees walked out. And half of the plant was already undergoing maintenance when the strike was declared on Feb. 1.

"Due to the USW's decision to strike during ongoing maintenance activities, the safest operating position at this time is to idle the remaining process units," said company spokewoman Tina Barbee.

A representative for USW Local 5 in Martinez said closing the plant also would allow Tesoro to ship nonstriking workers to its two other refineries targeted by the strike, helping keep those facilities open.

Company strategy

"It probably made more strategic sense for them to shut the plant that was already half down and take people from there and send them to the other refineries," said union representative Tracy Scott.

In all, about 5,240 USW members have walked out of nine refineries and two plants nationwide over health and safety issues. Talks between the union and Royal Dutch Shell, which is representing the oil companies in the contract negotiations, are scheduled to resume Wednesday.

"It could go a week; it could go on for months," Scott said.

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