Bay Area drivers see up to 5-cent increase; critics suspicious of pre-election declines
THE SAN FRANCISCO CHRONICLE
Gasoline prices have stopped their monthslong slide. In many places, they’re climbing again.
California’s average for a gallon of regular has risen about 3 cents since the start of the week, hitting $2.43, according to the AAA auto club.
San Franciscans are paying 5 cents more per gallon than they did earlier this week, with an average price of $2.53. Drivers in Oakland and San Jose have seen a 4-cent increase, with prices rising to $2.42 and $2.40, respectively.
The national average rose a penny this week, to $2.21.
The timing strikes many oil industry critics as suspicious. For months, they have argued that this autumn’s dramatic price drop was a political ploy designed to help oil-friendly Republicans in the midterm elections. They predicted that prices would rise once the ballots were counted.
“Let’s just say we’re not surprised,” said Judy Dugan, research director for the Foundation for Taxpayer and Consumer Rights.
But market analysts disagree.
They say prices fell because oil companies built up big supplies of gasoline this summer in anticipation of hurricanes that never arrived. Prices bottomed out this month and are rising again because those excess supplies are gone.
In addition, oil and gasoline traders are taking the Organization of the Petroleum Exporting Countries’ threats to cut production more seriously, said Brian Milne, editor of DTN MarketWire, an online news service for the wholesale fuel market.
“You have people looking at this dwindling surplus, thinking if this continues the supply situation is going to tighten up pretty quickly,” he said.
Despite the uptick, gasoline prices remain far lower than they have been for most of the year. California, for example, set an all-time record in May — $3.38 per gallon — and spent most of the summer above $3.20.
Crude oil helped keep those prices high. The cost of crude — gasoline’s main ingredient — stayed at or near $70 per barrel for much of the year before dropping to the $60 range in autumn.
Gasoline refineries also posted some of their biggest profit margins in years, which added to the amount Americans paid at the pump.
The difference between the price of crude oil and the price of gasoline — often used as a rough gauge of refinery profits — peaked in May at $39 per barrel for West Coast refineries.
Those profit margins shriveled in August and September, falling to $12 per barrel on the West Coast. Oil industry critics saw the drop as evidence of market manipulation. They said the oil companies were accepting a smaller profit margin in an attempt to drive down prices at the pump and mollify angry voters.
They noted that refinery profit margins also fell during October 2004, the height of the last presidential election. Gasoline prices actually jumped that month, rising 35 cents from mid-September in California. But critics say the increase would have been more if refiners hadn’t accepted a lower profit margin.
“The profit taking has gone down during the election cycles,” Dugan said.
Market analysts, in contrast, say the refiners were stuck with shrinking profit margins in autumn because they had cranked out far more gasoline than the country needed.
In October and early November, as the surplus shriveled, margins rebounded. They now average about $23 per barrel.
On the increase:
Since the beginning of the week, gas prices have been on the rise, after a monthslong slide. Here’s what’s happened to the price of a gallon of regular:
— California: $2.43, up 3 cents
— San Francisco: $2.53, up 5 cents
— Oakland: $2.42, up 4 cents
— San Jose: $2.40, up 4 cents