Gas Prices In California Jump Despite Oil’s Drop

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The average price soars 25 cents to $1.988 a gallon in less than a month,
while the U.S. average rises 10 cents to $1.784. Reduced production of California-grade gas is blamed.

That terrible feeling you got at the gas pump over the weekend and on
Monday was real: California gasoline prices have jumped 25 cents a
gallon in less than a month, the Energy Department said Monday, and
seemed poised to be the first in the continental U.S. to return to $2 a

It was all the more galling to drivers and to consumer advocates
because of the back story. California refineries have been increasing
production of cheaper grades of gasoline that do not meet California’s
strict emission standards and could be sold out of state, according to
weekly statistics tracked by the California Energy Commission. The
refineries were also producing less California-grade gasoline.

The increase could not be blamed on the price of crude oil, which was down Monday.

Crude oil futures for February delivery fell $3.24, or 7.9%, to $37.59
a barrel. That was more than 74% below the record crude price of
$147.27 in July.

The lower crude prices were the result of several factors, including
the sour U.S. economy and the easing of concerns that tensions in the
Middle East and Ukraine would push up costs.

"Oil prices will continue to be weak because of the economic situation
here and around the world," said Phil Flynn, chief energy analyst for
Alaron Trading Co. in Chicago, who added that the course might not
change until some sort of broad economic stimulus package began to pull
the U.S. out of its recession.

Nonetheless, California led a national jump in retail gasoline prices.
The price of a gallon of self-serve regular gas in California rose 11.4
cents over the last week and by 25 cents since Dec. 15 to $1.988 a
gallon, according to the Energy Department’s weekly survey of gasoline
stations. Nationally, prices rose 10 cents on average to $1.784 a

"It just makes me livid. It’s a real hot-button issue with me. It’s all
a man-made bunch of manure," said Chuck Schisler, a 56-year-old Lake
Forest resident and a telephone operator for the state of California.

Schisler is an avid gas-price watcher and a regular member of the
volunteer army of motorists around the country who report the highest
and lowest prices they see to the network of websites known as, which tracks prices in all 50 states.

"It’s like every gas-station owner in this part of Orange County had a
breakfast one morning and decided to jack up the price again," said
Schisler, who squeezes 34 miles a gallon out of his 1999 Honda Civic.

Santa Monica-based Consumer Watchdog accused California refiners of
manipulating the market to increase gasoline prices in the state.

Consumer Watchdog research director Judy Dugan pointed to California
Energy Commission statistics showing refinery production of
California-grade gasoline among the lowest levels in the last five
years and more than 14% below 2007 rates. Overall gasoline supplies
were running well below the five-year average, the state Energy
Commission statistics showed.

"What is most disheartening is that they are producing more for
out-of-state drivers at the expense of Californians," Dugan said.

Susanne Garfield, a spokeswoman for the California Energy Commission,
said that the shift in production was relatively minor and not enough
to raise concerns at this point. She noted that refiners were still
turning out 857,000 barrels a day of California-grade gas in a time of
lower demand compared with 89,000 barrels a day for Oregon, Nevada and

John Felmy, chief economist for the American Petroleum Institute, said
2008 had been a horrible year for refineries nationwide, which
sometimes were selling a finished product for less money per barrel
than the crude oil from which it was refined.

Felmy cited the recent bankruptcy filings of Flying J, a diesel fuel
distributor based in Utah, which has stopped production at a California
refinery, and Lyondell Chemical of Texas as prime examples.

"Small refineries in particular are facing a huge challenge. They are
running close to break-even in revenue, if not losing money," Felmy

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Consumer Watchdog
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