A couple years back (2002 and 2003) California also suffered several dramatic price increases on gasoline. At that time California suffered several unexpected refinery shutdowns due to maintenance or accidents. The shocked cries of outrage from the people of California who were suddenly paying over $2.00 a gallon for the first time led to this explaination from the U.S. Department of Energy, Office of Oil and Gas, Energy Information Administration for the sudden price increases:
Gasoline price volatility in California can be better understood by recognizing several features that make the market vulnerable to large price swings. First is that the area uses a unique gasoline that few suppliers outside the State can produce. Thus alternative supply sources are limited.
California gasoline is a unique blend that the State requires to help it meet its clean air goals. This blend is cleaner-burning than any other gasoline in the United States, and it is both more difficult and more expensive to make than other gasolines.
Refineries located within California produce almost all of the State’s gasoline. Historically this was mainly due to California’s distances from the major refining center on the Gulf Coast and from export refineries in other countries. When California began requiring a unique gasoline, the number of potential suppliers to the region declined. Few refineries outside of the West Coast are able to make CARB gasoline. Refiners must make investments to be able to produce this unique gasoline, and despite California’s higher margins, most refiners outside the region are unwilling to spend those resources for the occasional cargo they would ship to the region. While few refiners can make CARB gasoline, more are able to produce blending components such as alkylate or iso-octane of sufficient quality for California refiners to use to supplement their production. Still, the list of available suppliers is limited due to the high quality of component required.
So we had to pay a premium price for gas a couple years ago because our own state laws requiring clean-burning (there's an oxymoron for you) gasoline limits our production resources to the refineries in the State of California.
But now that Hurricane Katrina has shutdown or destroyed a significant portion of the gas refining capabilites of Louisiana we find our California gas prices going up.
Why?
If we don't import gasoline into California from out of state sources, why should the loss of production from those out of state refineries cause our California gas prices to rise?
I have three theories.
1. The out-of-state refineries since 2003 have started producing California style gas and exporting it to California.
2. The out of state refineries, since 2003, have started producing the blending products of the quality we need and exporting it to California.
3. The oil companies jumped on a good opportunity to really stick it to the people of California by gouging them at the pumps.
All in favor of option three raise your hands.
I personnally believe that the oil companies here in California are living up to their motto of :
Let no event , whether natural disaster, political upheaval, or personal tragedy deter us from raising prices to the maximum the suckers can afford to pay and when they scream tell them that they are too ignorant to understand the complicated issue of energy pricing.
More gas pricing information is available from the DOE Energy Information Division
Two weeks ago regular unleaded gasoline was $2.69 in Ridgecrest. On Tuesday it was $2.79. This morning it is $3.09.
Once again I ask – Why?
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UPDATE:
As of 5 PM the $3.09 price has been upped to $3.19
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