State gas prices are said to be insulated

Published on

The San Diego Union-Tribune (California)

State energy officials said yesterday that they don’t expect further increases in California gasoline prices as a result of refinery shutdowns along the Gulf Coast, where about 12 percent of the U.S. refining capacity remains shuttered or damaged.

The California Energy Commission said the state’s gasoline prices are much more likely to be determined by production from local refineries than by the ongoing refinery shutdowns.

In-state refineries satisfy about 90 percent of California’s demand of 1 million barrels per day. Imports from the Gulf Coast region, on the other hand, account for about 7 percent of the state’s supply.

“We are a little insulated from the gulf,” said Rob Schlicting, a spokesman from the California Energy Commission. “And it’s unlikely that gasoline produced in California would be shipped to the gulf (to make up for shortages there).”

Schlicting said the near-term direction of gasoline prices will become more apparent today, when weekly production numbers from the state’s refineries are published by the commission.

The Western States Petroleum Association characterizes California and other states in the region as an “island” market, with limited ties to other gasoline markets.

“But the full impacts of the storms are impossible to predict,” said Anita Mangels, a spokeswoman for the trade group.

Experts typically blame California’s higher gasoline prices on the special gasoline blend required here and the limited number of refineries that can produce it. Californians pay about 15 cents more for a gallon of regular gas than motorists elsewhere, according to the most recent federal data.

But while national wholesale prices rose 3 cents yesterday, statewide retail prices slipped about 1 cent to $ 2.97 per gallon of regular.

Consumer advocates said anti-gouging action by state attorneys general may have inhibited further price hikes. They added that a rare call for consumer conservation from the Bush administration may be causing the oil industry to hold the line on prices.

“Bush is sending signals to the industry that the type of world-record profits they are recording should not be jeopardized because if prices go up much further, there might be a populist backlash,” said Jamie Court, president of the Foundation for Taxpayer and Consumer Rights in Santa Monica.

Michael Shames, executive director of the Utility Consumers’ Action Network in San Diego, said he also sees evidence of industry restraint but said prices remain far above where they should be, given crude oil prices.

Earlier this year, he said, Californians were paying about $2.60 per gallon, a time when crude prices were about $ 65 per barrel, roughly yesterday’s closing price on the New York Mercantile Exchange.

Severin Borenstein, director of the University of California Energy Institute, said market factors remained dominant.

“Gas is really a commodity, and if there is a shortage, prices will rise,” Borenstein said. But he noted that shortages — distinct from spot delivery problems in the wake of the storms — have yet to appear.

Crude oil prices, meanwhile, eased yesterday, after a robust rally a day earlier, but markets worried about possible shortages in oil products as refineries assessed the damage caused by Hurricane Rita.

Light, sweet crude for November delivery fell 75 cents to settle at $ 65.07 a barrel on the New York Mercantile Exchange. It had risen $ 1.63 Monday.

“The feeling is there’s plenty of crude supply in the market, even though we’ve lost some imports and production,” said Tom Bentz, analyst at BNP Paribas Commodity Futures in New York.

Eight refineries in Texas and Louisiana remained shut yesterday because of Hurricanes Rita and Katrina, while eight others had restarted or were attempting to restart.

Several refineries in Texas could take weeks to fully resume operations.

Gasoline and distillates, such as heating oil, require refining, and prices for these products rose yesterday.

Futures for gasoline extended Monday’s gains, rising more than 3 cents to settle at $2.1664 a gallon. Heating oil rose a penny to $2.0686 a gallon.

Natural gas rose more than 21 cents to $12.656 per million British thermal unit.

Drivers elsewhere in the country are seeing higher prices at the pump, and analysts say that won’t change anytime soon. At an average of $ 2.81 a gallon, the U.S. retail price of gasoline is more than 20 cents higher than a month ago, before Katrina struck the Gulf Coast.

Refineries begin to shift production from gasoline to heating oil at this time of year. But analysts said oil companies will be under pressure to produce enough gasoline to prevent shortages and keep prices from spiking much above $3 a gallon. That could push production of heating oil back later than usual, they said.

“The heating oil market seems to be fairly well supplied, but if refineries are down for enough time, that surplus could diminish,” Bentz said.

The loss of natural gas is potentially even more worrisome, analysts said, because disruptions to crude output can be offset by barrels from the rest ofthe world, plus the government’s emergency reserve. There is no such safety valve for natural gas, and the country’s ability to import liquefied natural gas is limited.

More than 78 percent of daily natural gas output remained blocked in the Gulf Coast as of yesterday, the U.S. Minerals Management Service said. The region is the country’s main source for the product.

Annual output of oil and gasoline has declined by 6.6 percent and 4.7 percent, respectively.
The Associated Press contributed to this report.

Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

Latest Videos

Latest Releases

In The News

Latest Report

Support Consumer Watchdog

Subscribe to our newsletter

To be updated with all the latest news, press releases and special reports.

More Releases