KTVU TV-2 Oakland, CA – California Drivers Cope With Enormous Spike In Gas Prices

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KTVU – OAKLAND, Calif. (KTVU) — Despite still relatively low crude oil prices, gas prices in California have skyrocketed in the last month, rising more than twice as much as the rest of the nation.

Severin Borenstein, the chief energy economist at UC Berkeley's Haas School of Business Energy Institute offers an explanation.

"Oil prices went up a bit and that would have explained about 20 or 30 cents of the increase we've seen. But we've seen an increase of almost a dollar a gallon. The rest of that is due to the problems in California," said Borenstein.

Because California pretty much consumes all the gasoline refineries in the state produce, even a small disruption in supply is magnified. On February 6th, the Tesoro refinery shut down when workers went on strike. A fire at a Torrance Exxon refinery took that one out.

Those two incidents cost California almost one fifth of its refining capacity at a bad time of year, but there were additional factors at work.

"This is a time of the year that we always get price spikes in California as the refineries switch over from making winter blend to summer blend gasoline," added Borenstein.

In the Bay Area Monday, a gallon of regular averages $3.38. That's a penny higher than Sunday, but 48 cents higher than one week ago and a whopping 87 cents high than one month ago.

Liza Tucker, an energy consumer advocates at non-profit Consumer Watchdog, says that more refinery issues are further driving up prices.

"We also have refineries that don't keep more than 10-day supply of gasoline on hand, which is a really small cushion compared to the rest of the country that keeps about a 24 days on hand. And there's no system here where refineries stagger their outages. It's a recipe for spiking prices here," said Tucker.

The fact is, because the state has its own special blend of gas, California can't trade for fuel from state to state as other states do. Despite many state and federal investigations over many years, no one has ever found illegal price fixing. But, price manipulation is a possibility by simply withholding supply from the market.

"The fact is, that it's very hard to tell what's a genuine price increased and what's a manipulated price increase," said Professor Borenstein. "There's nothing illegal about that as long as they do it unilaterally, as long as they're not colluding."

"Basically it's a wink, wink and a nod, nod. I'm not sure that anybody has to really talk much about anything," added Tucker.

But it is all so sudden and so large, the industry is risking government intervention, requiring possibly more storage, the staggering of planned shutdowns and inspectors to make sure that what refineries say is truly true.

Refiners insist this is nothing more than a free market reacting to supply and demand.


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