San Diego now pays highest diesel prices in the nation

Charles Langley — Fri, 16 May 2008 17:20:16 -0700

UCAN News

At $4.77 a gallon, truckers are paying through the hose in San Diego.
Diesel prices are up 38¢ in seven days, regular costs $3.96 a gallon on average

Why are diesel prices climbing?

Diesel is the cheapest fuel to refine, but right now, thanks to arbitragers driving the price of oil to artificially high levels, ($126 a barrel today) the oil in a gallon of gas now costs $3 a gallon - and that's before refinery markups and about 67¢ in taxes.

Compare this price to February 2 of this year when you could buy a gallon of gasoline in San Diego for as little as $2.99 a gallon. What we are seeing with our fuel prices isn't just the result of market gaming and price redlining (although that is a big part of the equation), it is also about massive fundamental shifts in global demand.

Diesel used to be a byproduct of gasoline production. Refiners made diesel on the way to making more profitable gasoline. It isn't that way any more: A typical barrel of oil yields about 10 gallons of diesel fuel, and about 20 gallons of gasoline. Meanwhile, demand for diesel has increased globally, while gasoline demand has not increased proportionally. In fact, in the next several years, gasoline will be a byproduct of diesel production.

Factors behind higher diesel prices.

ULSD - Ultra-Low-sulpher Diesel mandates not much of a factor

We're betting that refineries will blame government clean air mandates for high diesel costs, but the according to Diesel Fuel News, the amortized costs of removing sulpher from a gallon of diesel is about 2.5¢ per gallon. This new diesel is also exceptionally clean - so much so that Europe and the U.S.A. have switched over to a cleaner diesel fuel standard.

Higher demand for ULSD is a factor

The raw manufacturing costs of ULSD aren't that significant, but because the product is so desirable, more than 50% of all European cars now run on diesel according to Platts News. This has increased demand for the former gasoline "byproduct."

Increased demand from China

As China's economy grows, demand for its heavily dependent diesel fleet is growing, too. Demand for oil in China is growing at a rate of 7.5% per year according to the the Institute for the Analysis of Global Security. This rate is seven times faster than U.S. demand.

Diesel delivers more the bang for the buck than gasoline

A diesel engine is more efficient than a gasoline engine. Some diesel trucks deliver almost as much horsepower as their gasoline equivalents and get nearly twice the miles per gallon. In passenger vehicles, you can expect to improve mileage by about a third when you choose a diesel engine instead of a gasoline engine. The diesel-powered Volkswagon TDI for example, compares favorably with a Prius in terms of gas mileage delivering an EPA rated 40 miles per gallon.

Less demand for gasoline

While demand for diesel has increased, gasoline demand has declined. For the first time in 17-years, Americans are buying less gas. (Reuters).

And finally when you add in additional factors such as market gaming by arbitragers, price redlining by refineries, anticompetitive mergers by the FTC, and 10 years of disastrous energy and foreign policy ... you get precisely what we are experiencing right now ... $4.77 a gallon diesel, and horrific economic malaise.

And that's the good news. The bad news is that this is going to be the worst energy crisis since World War II. Let's hope it doesn't get worse. Other wars have been fought over less.

High gas prices drive retailers out of business

Charles Langley — Fri, 09 May 2008 14:46:18 -0700

UCAN In the Media

GAS: Prices squeeze stations, too

Several have closed in recent months, providing extra bump at pump

By CHRIS BAGLEY - Staff Writer | Thursday, May 8, 2008 5:47 PM PDT

Record wholesale prices for gasoline have squeezed profit margins for gas stations in North County and elsewhere, a development that other station owners and a consumer advocate say are responsible for several recent closings.

Charles Langley, an advocate and analyst with the San Diego-based Consumer Utility Action Network, estimates that twice as many North County stations have closed since 1998 as have opened. He said he suspects the closings, which include four this year, are a reason that pump prices in North County have risen by a bit more than in central San Diego over the decade.

In contrast to the relative handful of large corporations that produce gasoline from oil, the thousands of station owners typically have just one to five locations, according to the National Association of Convenience Stores. They compete intensely with one another, knowing that a driver who passes a station advertising gas for $3.80 a gallon can easily pull into a nearby station with a posted price for $3.79.

The California Energy Commission estimates that independent stations' average margin, a measure that includes profits and marketing costs, has fallen to 6 cents a gallon, compared to 34 cents a gallon for refiners and the $2.83 that buys the oil. Station owners say rising prices at the wholesale level have made the retail market even more competitive.

"They're killing us," said Lawrence Kourie, who co-owns seven stations, including three in Encinitas.

The average retail price of regular unleaded fell 1.5 cents from last week's record to $3.90 a gallon on Thursday, according to Langley's weekly survey of 148 North County stations. Diesel rose by 2 cents to a record $4.47.

Consumers and independent gas stations are almost certain to feel an even tighter squeeze in the next few weeks because of rising prices at the wholesale level, Langley said: Oil prices hit new records near $124 a barrel Wednesday night before falling back slightly on Thursday.

Raw gasoline for blending shot up to $3.19 a gallon Thursday from $2.97 a week earlier, Langley said, citing data from Los Angeles-area ports.

Stations that sell unbranded gasoline help to keep retail prices in line because they can often buy surplus gas at the lowest wholesale prices, Langley said. More closings could add a few extra pennies onto the cost of each gallon in coming years, he said.

Independent gas stations already closed this year include Reflecshine on College Avenue in Oceanside and Regent Gas Station at Highway 101 and F Street in Leucadia.

Oceanside Gas, an independent, unbranded station on Mission Avenue, closed last month after just a couple of years in operation.

A couple of miles down the road, gas-station owner Mohsen Arabshahi said he believes rising wholesale prices were the reason.

Joe Carr, who owns a repair shop and three pumps on Mission Avenue, said there may have been other reasons, but Carr said there's little doubt that higher gas costs and intensifying competition are to blame in most such cases.

"I haven't made any money (on gas) since Bush got in office," Carr said Thursday morning. "And it seems like someone in Sacramento is always writing a new law. I don't know how much longer I'm going to sell fuel."

A couple of minutes later, Oceanside resident Joe Bayer pulled his four-door Honda Civic up to one of Carr's pumps, where regular gas was $3.85 a gallon. Bayer said he's been buying gas at Carr's and other stations near Camp Pendleton's back gate because they're generally cheaper than the stations at traffic lights on nearby Highway 76. But he certainly doesn't drive up and down Mission Avenue looking for the best deal because there are no longer enough stations there to matter, he said.

"It's not a matter of shopping," Bayer said. "It's a matter of who's closing."

The closings reflect a squeeze between higher wholesale prices and thrifty drivers, Bill Douglas, a former chairman of the National Association of Convenience Stores said in congressional testimony Wednesday. The average convenience store made just $23,335 in profits last year, he told the House of Representatives' Anti-Fraud Task Force.

The California Board of Equalization, which collects sales tax from gas stations and other retailers, reported last week that statewide gas consumption in January fell 8.6 percent from December and 4.5 percent from January 2007. Consumption for the full year fell by 1 percent from 2006, the agency reported. Economists have attributed the year-to-year declines, rare in recent history, to a weakening economy and to drivers who are carpooling or driving smaller vehicles.

North County drivers interviewed in recent weeks have said they're also making fewer trips; at $50 to $100, each tank eats up a larger slice of the gasoline budget, some have said.

"You can visibly see the hurt in their faces," Carr said Thursday. "They're not smiling."

Contact staff writer Chris Bagley at (760) 740-5444 or cbagley @ nctimes.com.

Gas prices edge down slightly as oil pushes past $120 a barrel

Charles Langley — Mon, 05 May 2008 11:08:50 -0700

UCAN News

Editor's note: If you've wondered what happened to our cheap gas locator, click here to see our two-minute video letter.
To see an overview of how oil refineries in California manipulate retail prices, click here.

Oil prices scream past $120 a barrel as local gas prices drop.

Today, with oil trading at more than $120 a barrel, San Diego gasoline prices actually dropped by slightly more than a penny, on average, since last Monday. Diesel prices edged lower, too, dropping three cents in the last week (see statistics below).

Unfortunately, the downturn is likely to be short lived. Since this morning, the LA spot market, which drives wholesale prices surged in sympathy with high oil prices to $3.14 a gallon at noon, up from $2.96 a gallon on May 1, 2008. The price hikes are occurring even though there is a surplus of gasoline on the market.

Why would gas prices drop when oil is at record levels?

The simple answer is that consumers have been gouged so deeply that they are unable to pay the current price. Earlier this year, refineries reacted to lower consumer demand by cutting back supply. Just like the electric crisis of 2000 and 2001, oil companies have learned that by restricting supply, they can keep gasoline prices at artificially high levels. According to the California Board of Equalization, which collects taxes on every gallon of gasoline and diesel sold, demand is the lowest it has been in 16 years.

Demand for gasoline has dropped significantly. and refineries have overproduced, creating a surplus for spot gasoline on the LA market. Spot gasoline is surplus fuel that is traded between refineries and also purchased by independent fuel brokes and jobbers who pay cash on the "spot" for delivery.

If an oil company is able to manipulate the spot market, it has the ability to game the market. There are two ways to do this: the first is by intentionally creating shortages by shutting down refieneries or exporting fuel overseas or out-of-state, and the second is by panicking the spot market.

This spot fuel is ultimately sold to consumers by unbranded independent dealers. These unbranded dealers tend to be the most competitive players in California's retail gasoline markets. Because they are the most competitive, the these independent stations represent the retail price floor in California - and when their prices go up - the major brands are free to raise their prices, too.

Last week's price cuts were prompted by a massive 18¢ drop in the spot price of fuel between Thursday, April 24, and Thursday, May 1.

Today, the average price of retail gas in San Diego is likely to rebound as high oil prices drive the price of spot market fuel higher.

Statistics: (Today / Last Week / Last Year )

Price of regular gas today: $3.907 gallon

Price of diesel today: $4.415 a gallon

Price of oil today: $120.3 a barrel or $2.86 per gallon of gasoline

Price of regular gas this day last week: $3.918 a gallon

Price of diesel this day last week: $4.44 a gallon

Price of oil this day last week: $118.75 a barrel or 2.82 per gallon of gasoline

Price of regular gas this day last year: $3.403

Price of diesel this day last year: $3.084

Price of oil this day last year: $65.20 a barrel or $1.552 a gallon.

Rising gas prices starting to spill into local businesses and tourism

Laura — Tue, 29 Apr 2008 14:11:20 -0700

UCAN In the Media

Steep Gas Prices Exerting Wide Strain On Local Companies

Little Relief in Sight Until Fall, Analyst Says

By CONNIE LEWIS

San Diego Business Journal Staff

For the past few years gasoline prices have spiked in the spring and gone down at the beginning of the summer driving season. But as oil prices continue to break record highs, analysts predict that relief at the pump is further off.

At least one, Charles Langley with Utility Consumers’ Action Network, a local advocacy group, doesn’t expect gas prices to drop until the November presidential election nears.

“First of all, we hope that gas does not breach the $4 level in San Diego, but we think it will shatter that barrier in the next couple weeks,” Langley said.

On April 23, regular unleaded gas, according to the AAA Daily Fuel Gauge Report, averaged $3.91 a gallon, up from $3.89 the day before, $3.65 a month ago and $3.39 on the same day last year.

Langley also thinks that if prices go back down, politics, not market conditions, will be the reason.

“There will be a concerted effort on the part of the oil industry to stabilize prices going into a major election,” he said, citing the 2006 midterm election when gas prices dropped 90 cents a gallon as a case in point.

“The oil industry understands that no matter how much money they give to politicians, when prices are high consumers get upset,” he said. “They understand that if they want to maintain an oil-friendly government they must lower prices before an election.”

According to University of San Diego economist Alan Gin, “Every 10-cent increase in a gallon of gas takes $7 million a month out of the local economy.” But the caveat would be if motorists changed their behavior by buying more fuel-efficient cars or reduced their driving, he added.

“Inflation is also a result of higher gas prices, and because we don’t produce much (gasoline), a lot of what we consume is trucked in. That eventually translates into higher prices at the retail level,” he said.

Weighing Rate Adjustments

Rebecca Blackwood, co-owner of Crest Offset Printing Co. in National City, said that in the past the company has adjusted its rates upward in accordance with higher paper costs, but has held off additional increases in the face of higher fuel costs.

That was before receiving a recent statement billing her for nearly twice the amount from the prior month for gas charges to fuel a van and two cars used for pickups and deliveries.

“Granted, we’re busier so that’s part of it, but a big chunk was the increase in gas prices,” she said.

How much the company will raise its prices is uncertain, but it may also charge for deliveries of smaller orders, she added.

Bertrand Hug, who owns Bertrand at Mr. A’s and Mille Fleurs restaurants, said he’s seen food prices go up about 15 percent since last year.

Hug said he’s paying about 10 percent more for produce, while beef and fish prices have jumped 20 percent, he added.

Hug estimates that rising food costs, in addition to the delivery surcharges he now pays, will reduce Mr. A’s profit by 5 percent and Mille Fleurs’ by 2 percent this year. Still, he considers himself lucky because his customer count has remained steady.

According to Steve Zolezzi, executive vice president of the Food & Beverage Association of San Diego, which represents 700 restaurant and hospitality companies, eateries are experiencing decreases in both clientele and check amounts.

Sal Giametta, spokesman for the San Diego Convention & Visitors Bureau, said that while visitors have proven to be resilient to prior gas price increases, he’s not so sure about this year.

“Add the global credit crunch, volatility in the stock market, a declining housing market, increased health care costs as well as higher food costs to a significant increase in gas prices and you have a high number of variables that impact consumer confidence,” he said. “The visitor industry is very susceptible to consumer confidence, because when it’s low people will cut back on discretionary spending and that includes leisure travel.”

Effects On Tourism

On the plus side, San Diego is a drive-to destination that traditionally has been able to rely on nearby Los Angeles and Phoenix to supply visitors.

ConVis is concerned, however, that demand for lodging has slowed, both locally and throughout the United States.

According to Smith Travel Research, which tracks the hotel industry nationwide, the county’s innkeepers had an occupancy rate of 68.4 percent from Jan. 1 through the end of March, which was down 3.1 percent from the same period a year ago. For the country as a whole, occupancy stood at 57.8 percent, down 2.7 percent.

Steep gas prices exerting wide strain on local companies

Sandy Young — Mon, 28 Apr 2008 17:42:00 -0700

UCAN In the Media

Steep Gas Prices Exerting Wide Strain On Local Companies

Little Relief in Sight Until Fall, Analyst Says

By CONNIE LEWIS
San Diego Business Journal Staff

At least one, Charles Langley with Utility Consumers' Action Network, a local advocacy group, doesn't expect gas prices to drop until the November presidential election nears.

"First of all, we hope that gas does not breach the $4 level in San Diego, but we think it will shatter that barrier in the next couple weeks," Langley said.

On April 23, regular unleaded gas, according to the AAA Daily Fuel Gauge Report, averaged $3.91 a gallon, up from $3.89 the day before, $3.65 a month ago and $3.39 on the same day last year.

Langley also thinks that if prices go back down, politics, not market conditions, will be the reason.

"There will be a concerted effort on the part of the oil industry to stabilize prices going into a major election," he said, citing the 2006 midterm election when gas prices dropped 90 cents a gallon as a case in point.

"The oil industry understands that no matter how much money they give to politicians, when prices are high consumers get upset," he said. "They understand that if they want to maintain an oil-friendly government they must lower prices before an election."

According to University of San Diego economist Alan Gin, "Every 10-cent increase in a gallon of gas takes $7 million a month out of the local economy." But the caveat would be if motorists changed their behavior by buying more fuel-efficient cars or reduced their driving, he added.

"Inflation is also a result of higher gas prices, and because we don't produce much (gasoline), a lot of what we consume is trucked in. That eventually translates into higher prices at the retail level," he said.

Weighing Rate Adjustments

That was before receiving a recent statement billing her for nearly twice the amount from the prior month for gas charges to fuel a van and two cars used for pickups and deliveries.

"Granted, we're busier so that's part of it, but a big chunk was the increase in gas prices," she said.

Oil, oil everywhere, but not a drop that's affordable

Laura — Tue, 22 Apr 2008 12:10:18 -0700

UCAN In the Media

Gas prices soar; no slowdown in sight

Unlike previous spikes linked to shortages, this time there's a surplus

By Penni Crabtree

UNION-TRIBUNE STAFF WRITER

April 18, 2008

SAN DIEGO – It's a painful paradox that's being felt in San Diego and across the nation: plenty of gas to be had, yet record-high prices.

There have been more than two weeks of daily gas-price records in Southern California – AAA estimated Friday's average for regular unleaded gas in San Diego County at $3.83, 7.8 cents higher than last week and 49 cents higher than last year – and still no sign of a slowdown, according to gas-industry experts and consumer watchdog groups.

But unlike some past gas-price spikes linked to limited inventories, some refiners say there's a surplus of gasoline. In fact, they're cutting back U.S. production because of lower consumer demand and plunging profit margins.

A ravenous demand for fuel from developing countries such as China and India, investor speculation in oil futures, and a continuing weak dollar are pushing gas prices to record highs, they say.

“The price of gas is not high because there is any shortage of it. In fact, there is a surplus of gas. ... We are running out of places to put it,” said Bill Day, a spokesman for Valero Energy Corp., which runs two refineries in California.

“Gas is high because the price of crude oil is high,” Day said. “Consumers think there is someone pulling the strings and setting prices, but it's the marketplace that sets the price. It is very, very unusual for oil to be as expensive as it is, and the dollar to be as low.”

Crude futures Friday surged to a record of more than $117 a barrel in after-market trading, pushed higher after a militant group in Nigeria said it had sabotaged a major oil pipeline operated by a Royal Dutch Shell joint venture and promised further attacks on the country's petroleum industry.

Light, sweet crude for May delivery settled up $1.83 at a record $116.69 a barrel on the New York Mercantile Exchange. It was the fifth day in a row that crude prices set records.

The escalation in crude prices threatened to further boost gasoline costs.

At the pump, the national average price of regular gas rose 2.7 cents overnight to a record $3.445 a gallon, according to a survey of stations by the American Automobile Association and the Oil Price Information Service. Diesel fuel added 2.2 cents to a record national average of $4.168 a gallon.

“I would say that energy prices are having the most profound effect on the economy in recent memory,” said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago, in a research note.

It's not only at the gas pump that consumers are feeling the pain. Diesel fuel runs most of the world's trucks, trains, ships and heavy equipment, and is a major factor in pushing food prices higher, experts say.

“It's the cost of diesel that is really harming consumers in a way they can't see,” said Charles Langley of San Diego's Utility Consumers' Action Network, which tracks local fuel prices. “When you fill up the tank and it costs $60 or $100, it hurts, but when you go to the grocery store and the price of meat and vegetables is soaring, that's diesel in action, and it's highly inflationary.”

Friday, local gas was $3.86 a gallon, up from $3.76 from the previous week and $3.35 a year ago, according to UCAN estimates. Diesel reached an unprecedented $4.42 a gallon, up from $3.14 a gallon a year ago.

UCAN predicts that fuel prices will peak sometime in May, hold steady, and then drop before the fall election. But that assumes a stable oil price, and that's a big assumption, Langley said.

“Here's the scary part: Oil prices have increased by 182 percent, while gasoline costs have only increased by 115 percent,” he said. “If today's gas prices reflected the same level of increase in oil prices, plus last year's refinery margins, San Diego gasoline could potentially cost as much as $5 a gallon.”

No one is predicting $5 gas; refiners and others can't charge that kind of money because they would price themselves out of the market, Langley said. But refineries have been shutting down capacity to restrict supply, helping to further drive up the price of fuel, he said.

Langley said he's still hopeful that gas won't go above $4.

“At this point it seems like a sunny, optimistic prediction,” Langley said. “But if it does go above $4, it won't stay for long – at least that's our hope.”

The government is deceiving you about the rate of inflation.

Laura — Fri, 18 Apr 2008 11:47:02 -0700

UCAN In the Media

UCAN Editor's Note: This story says what we've been saying for years: the "core rate" of inflation is rotten to the core. See our story on this "jeff.schrantz [at] gmail [dot] com" target="_blank">Energy Prices and the Inflation Rate Swindle" from UCAN's April 2006 Watchdog newsletter.

The Fed's inflation gauge isn't realistic, critics say

By Dean Calbreath
STAFF WRITER, San Diego Union Tribune

April 17, 2008

You've seen the cost of a gallon of premium gas breach the $4 mark at local stations. You've seen the price of milk, eggs, corn and bread surge at your supermarket. Yesterday, the government confirmed that prices are continuing to rise at a very brisk pace.

In March, consumer prices rose 0.34 percent, for an annualized rate of more than 4 percent, according to the U.S. Department of Labor. That's only slightly lower than the 2007 annual rate of 4.1 percent – which was the highest inflation rate this decade.

On the other hand, so-called core inflation – which excludes energy and food prices because they are considered volatile – rose only 0.15 percent, or 2.4 percent over the past year, which is close to the Federal Reserve's 2 percent comfort zone.

For the Federal Reserve, the core inflation rate amounts to a green light to continue its policy of lowering interest rates in order to keep the economy from falling into a deep recession. A higher inflation rate could conceivably make the central bank freeze or raise interest rates.

But many economists say the core rate does not show how inflation is affecting the typical consumer. Because salary raises for most people are not keeping pace with the rising cost of living, people are using a greater percentage of their wages to buy a smaller amount of goods.

“Food prices and the price of gas are really eroding the purchasing power not just of the working class, but people in the middle class, who are already beginning to have a hard time making ends meet,” said business-trend consultant Joel Kotkin.

John Williams, who spent more than two decades as an economic consultant to Fortune 500 companies, said the government figures understate the true rate of inflation.

Williams, who runs Shadow Government Statistics in Oakland, which tracks changes in inflation, unemployment, the gross national product and other data, said that over the past 25 years, the government has changed the method of calculating price increases in ways that have lowered the reported inflation rate.

The changes include measuring the cost of shelter by rental prices instead of home values, as well as giving nearly as much weight to high-ticket items such as cars and electronics as to daily necessities such as food and gasoline.

According to Williams, if the government measured inflation based on pre-1982 methods, it would be running at 11.6 percent right now, or 7.3 percent using pre-1998 calculations.

“I don't think the government numbers are too credible,” Williams said. “When they say food inflation is moving up by 0.2 percent, that just doesn't match what we're seeing in the market. But even if inflation is as low as they are reporting, it's high enough to be terribly destructive to the economy.”

A number of other analysts echo that viewpoint. Rudolph-Riad Younes, co-manager of the Julius Baer International Equity Fund, estimated in December that inflation was running at 8 percent to 10 percent.

San Diego investment guru Richard Russell said in a recent newsletter that the Federal Reserve “makes up its own inflation figures. True inflation is running wild.”

Other economists are skeptical of such claims. James Hamilton, an economist at the University of California San Diego, said changes in the inflation rate over the past 25 years “don't represent huge differences” from the way overall inflation is currently measured.

On the other hand, Hamilton said he does “not take too much comfort in the core inflation rate.” He noted that food and energy prices have been rising steadily for several years and that polls show consumers now expect inflation to continue rising at more than 4 percent.

“I would think that would really be troubling to the Federal Reserve,” Hamilton said.

Economists say inflation has forced consumers to cut back on the goods they are buying.

Everybody's cutting back and getting squeezed in one way or another,” said Michael Belch, a marketing professor at San Diego State University. “If you're a blue-collar worker paying more and more for gas so you can drive to work each day, there comes a point where you become inelastic, and you have to start deciding there are things you just can't spend money on anymore.”

Nearly 56 percent of Americans believe their current economic standard of living is declining, according to a national poll this month by the Sacred Heart University Polling Institute in Connecticut. That number is up from 24 percent in 2006. Only 38 percent of respondents said their standard of living is improving, compared with 72 percent in 2006.

“Clearly, the crisis in the credit markets coupled with significant increases in not just gas but also food have combined to make the average American feel poorer and pessimistic about the future,” said John Gerlach, an associate business professor at Sacred Heart.

In high-cost areas such as San Diego County, the effects of inflation are even more pronounced, since prices often rise faster than local salaries.

Although the Labor Department does not release monthly data on regional inflation, its annual data show that in the past five years, consumer prices in the county have jumped 22 percent, compared with 16 percent nationwide.

“The three main reasons were our housing prices, gas prices, and electricity and utility rates, which were all rising faster than the national average,” said Kelly Cunningham, an economist with the San Diego Institute for Policy Research.

Thanks to the softness in the county's housing market, inflation softened last year to 2.3 percent, compared with the national rate of 3.1 percent.

Recently, the primary driver of inflation – both in the nation and the county – has been the rising cost of fuel.

In San Diego County, the average price of a gallon of regular gasoline rose 18 percent, from about $3.23 in March 2007 to $3.83 on Monday, according to the Utility Consumers' Action Network, which tracks fuel and utility prices.

The rising price of fuel has pushed up other items as well, notably food, which depends on oil for transportation, cultivation equipment and fertilizers.

Since last March, the price of eggs has gone up 35 percent; bananas, 17 percent; bread, 16 percent; apples and chicken, 10 percent; and ground beef, 7 percent, according to Labor Department data.

These price rises have been particularly hurtful to people living on fixed incomes – including the elderly – since their government-provided benefits are lagging behind the rising costs. Social Security and other government benefits are tied to the official inflation rate.

“Inflation is really hurting seniors, because they're on fixed income and food is costing more and more,” said Father Joe Carroll, who runs the Father Joe's Villages charitable organization.

Carroll said inflation is wreaking havoc with his own budget because – among other things – the rising price of gasoline is adding to his costs of transportation and picking up donations of furniture and clothing.

“Everything we're looking at is going up,” Carroll said. “Inflation and the downturn in the housing market (are) having a huge impact on us. I've been working all day looking at ways of cutting my budget. For the first time in 25 years, I'm thinking of cutting programs.”

Dean Calbreath: (619) 293-1891; dean.calbreath [at] uniontrib [dot] com

Gas price increases likely to affect summer vacation budgets

Laura — Fri, 18 Apr 2008 10:25:14 -0700

UCAN In the Media

ENERGY: Oil, gas prices blaze into record territory

By CHRIS BAGLEY, North County Times Staff Writer

Thursday, April 17, 2008

Fuel prices hit record highs nationwide Thursday, with regular unleaded gasoline surging to $3.82 a gallon in North County, up 8 cents from last week and extending 10 weeks of increases.

Diesel fuel, which powers most delivery trucks, hit $4.35 in North County, according to a weekly survey by the San Diego-based Utility Consumers' Action Network. Diesel's 40 percent rise since last year has forced many North County businesses to accept new fuel surcharges from suppliers, and some have begun to pass the increases to consumers, fueling broader inflation.

Since early February, average prices of regular unleaded have risen 75 cents, a 10-week stretch equaled only by the period leading up to a record set in mid-May 2007.

The trends are particularly worrying when the per-gallon price is broken down into taxes, oil costs and the costs and profits associated with refining, Langley said. Refiners accounted for about $1.50 of each gallon last summer, a share that has fallen toward 20 cents as they're squeezed by rising oil prices and newly frugal drivers, Langley estimated.

"That's bad," said Charles Langley, who conducts the weekly survey for the consumer group. "If they go back up to the type of margins they had last summer, they'll be well, well, well above $4."

Nationally, regular unleaded passed $3.41 a gallon, fulfilling expectations that prices will keep climbing toward $4 as the summer driving season approaches.

Oil prices fluctuated after setting yet another high, of $115.54, Thursday morning. Analysts said investors were locking in gains from crude's ongoing rally and trying to determine whether prices have more room to rise.

In part, gas prices are rising because refiners are switching over from winter-grade gasoline to the more expensive, but less polluting, fuel they're required to sell in the summer. That has pulled supplies lower lately as refiners try to sell off all of their winter fuel. Short supplies of key blending components needed for summer gasoline are exacerbating the problem.

Rising crude prices and higher summer demand are expected to drive up gasoline more. A sagging economy and price-conscious drivers have driven down demand for gas since January, but it's expected to rise from current levels as more families may hit the road for vacation in a few months.

"We have the perfect storm brewing," said James Cordier, president of Tampa, Fla., trading firms Liberty Trading Group and OptionSellers.com.

Oil, meanwhile, has jumped ever higher on concerns about falling supplies and rising global demand. A weaker dollar, too, has attracted speculative investors to crude futures. Crude rose to its new trading record of $115.54 Thursday morning as the dollar fell to a new low against the euro, but later pulled back when the dollar strengthened. A falling dollar also makes oil cheaper to overseas investors and more expensive to U.S.-based refiners.

The Associated Press contributed to this story. Contact staff writer Chris Bagley at (760) 740-5444 or cbagley [at] nctimes [dot] com.

Refineries restrict supply as gas and diesel reach new record highs in San Diego

Charles Langley — Mon, 14 Apr 2008 11:26:46 -0700

UCAN News

Valero admits to intentionally restricting gasoline supplies

Today, gasoline and diesel prices surged to new record highs in San Diego County thanks in part to an intentionally created shortage by one of California's top refiners.

According to UCAN's Gas Project, the price of regular unleaded gasoline now averages $3.80 a gallon in San Diego. The new record-breaking price is 12¢ higher than this day last week, and 19¢ higher than this day last month. Gasoline now costs 77¢ more than it did on January 31, when the price was $3.03 a gallon - the lowest so far this year.

Diesel prices continue to move into upper realms of unaffordability with a new average today of $4.34 a gallon - up 84¢ since January 31, 2008, and $1.22 more per gallon than this day last year.

Today, the cost of the oil in a gallon of gasoline is $2.62 a gallon, or 70% of the retail cost of a gallon of gas. Last year on this day, the cost of the oil in a gallon of gas was $1.51 or 45% of the retail cost of a gallon of gasoline. (Source: UCAN original research and EIA oil price history).

What this means is that refineries are making significantly lower margins today than they got used to making last year. Part of the problem is that consumers and businesses cannot afford to pay the current high price for diesel and gasoline. As a result, customers have stopped buying. This has created a surplus of fuel. In a free market, a surplus of fuel would mean lower prices. Unfortunately we don't have a free market in California. Prices are tightly controlled by refineries that have mastered the art of creating the perception of a shortage just as the price of fuel begins to normalize.

If the refineries decide they need to make more money, they will shut down capacity to restrict supply and drive up the price of fuel. This is what normally happens during the annual Spring Gouge Season for gasoline. And that's what happened last week.

In fact, it is exactly what Valero Energy did last Tuesday, according to the report below from OPIS, the Oil Price Information Service. Note the underlined text - what Valero is saying is that they are not making enough money on a gallon of gasoline, so, in order to boost prices, they are creating a small shortage by underproducing gasoline. This small shortage of gasoline (far less than 2% of the State's supply) was enough to push local prices 9¢ higher in one week.

2008-04-08 09:49:52 EDT
***REFINERY UPDATE: VALERO WILMINGTON RESTARTS FCC
   Valero's 135,000-b/d Wilmington, Calif., refinery began the restart of a
fluid catalytic cracker (FCC) during the weekend, spokesman Bill Day told OPIS.
The unit was shut down for repairs on March 27, along with the alkylation unit
that was restarted last week. Day said Valero is not running the FCC at full
operating rates due to current market conditions.
   Citgo's refinery in Corpus Christi, Texas, began the restart of a coker unit
today after scheduled turnaround maintenance, according to a filing with the
Texas Commission on Environmental Quality (TCEQ). The unit is expected to be
operating at capacity by April 15.   --Sheena Martin, smartin [at] opisnet [dot] com

Adding fuel to the fire for high diesel prices, British Petroleum/Arco reported a flaring incident on April 10 for its diesel hydrocracker unit, which produces 45,000 barrels of diesel a day.

Source: OPIS, April 11, 2008

... In other news, last night, BP reported a flaring incident at the 265,000
b/d Carson refinery in Southern California. The filing with the state did say
that a fire was extinguished within ten minutes.
A loss of a compressor has forced the major to take down a 45,000 b/d
hydrocracker, sources familiar with operations at the refinery say. There was
a small fire in the compressor as well, but was put out relatively quickly and
it was believed that the fire did not cause damage to the equipment. One of
the seals on the compressor needs to be repaired and once an inspection of the
unit happens a restart could be attempted. Sources say the hydrocracker could
be back in operations as soon as Monday.
REFINED PRODUCTS...
Diesel markets were moving up late in the day as buyers came into the
market looking for barrels. The turnaround in basis was tied to the loss of a
hydrocracker at BP's 265,000 b/d Carson refinery. Meanwhile, CARBOB premiums
pulled back a bit more, but with a late rally on the screen, cash market
losses were on the lighter side.

Price Manipulation or "Inventory Management?"

UCAN has questioned the necessity of some shutdowns. We believe that the California wholesale market for gasoline is so anti-competitive that refineries can manipulate the market at will by restricting a small fraction of their supplies through refinery shutdowns or other means. These actions help maintain profitable inventories, and prevent losses from money-losing supplies of surplus gasoline.

April Fuel's Day - Diesel now $1.10 more per gallon than last year, gas at new inflation adjusted high

Charles Langley — Tue, 01 Apr 2008 14:10:22 -0700

UCAN News

Today, as the House of Representatives grills the oil industry over America's gas woes, motorists are feeling "feulish." Nationally, gas is approaching the all-time inflation adjusted high (source) of $3.41 a gallon, set in 1981.

In San Diego, where gas prices have exceeded the inflation adjusted record for months, UCAN's gas project reports a current average price of $3.64 a gallon for regular.

Meanwhile diesel prices have increased by 36% in the last year to a new record high of $4.14 a gallon.

Last year on this day, gasoline cost $3.28 a gallon for regular, and diesel was much cheaper at $3.03 a gallon.

In the meantime, the price of oil, which is selling on the NYMEX today at $101 a barrel, cost just $66 a barrel last year - an increase of 53% that has not showed up at the pumps ... yet.

But perhaps the cruelest joke this April Fuel's day could be the hearings on high gas prices in the House of Representatives, as debates rage over why the oil industry should continue to get huge tax breaks at a time when it is enjoying banner profits. According to Representative Edward Markey, "These companies are defending billions of federal subsidies ... while reaping
over a hundred billion dollars in profits in just the last year alone."

Recently, a move to transfer Big Oil's welfare style tax subsidies to alternatives such as Solar, was blocked by Big Oil's friends in the Senate.

Historically, political heat tends to bring down fuel prices (get proof here). But if history repeats itself (and it probably will) consumers could get slight relief from gas pain as the hearings drag on. But if relief happens it won't be much and it won't last long. As soon as the political heat is off, the prices will start to climb again.

Right now the winds of history are at Big Oil's back.

In fact you could call it a wind from behind.

A powerful, mighty wind.

More bad news for gas prices expected soon

Charles Langley — Fri, 28 Mar 2008 13:42:36 -0700

UCAN News

Record high prices for gasoline expected

Record high gas prices are likely to climb higher this weekend from the current record high of $3.606 a gallon in San Diego, according to UCAN's Gas Survey at www.fueltracker.com.

Today, OPIS, the Oil Price Information Service, reported that Valero's Wilmington Refinery has taken 55,000 barrels of capacity a day offline after discovering a leak.

Gas prices surged on the LA Spot Market by almost 10¢ today despite record low consumer demand for gasoline.

Valero has confirmed that the unit could be down for up to ten days. The shutdown represents a little more than 2% of the state's gasoline production capacity. Although the amount taken offline is relatively small, it adds fuel to an already high-priced fire that started when British Petroleum's Arco refinery in Carson was shut down recently. The Carson refinery, which represents 13.5% of California's refining capacity, has been shut down two weeks longer than expected after its spring turnaround.

Although Valero's leak represents less than a 2% cutback in supplies, it was enough to panic the spot market.

According to UCAN's gasoline Project Manager, Charles Langley, this is the "spring gouge season." Historically, says Langley "Refineries can increase their profits by restricting the supply of gasoline and driving up prices."

This year, refinery profits have been much lower than normal because of high oil prices (see stats below) and the fact that consumers are buying less gas. As a result, says Langley, it pays to intentionally shut down a refinery in order to shore up prices."

UCAN has argued that the best solutions for preventing the manipulation of wholesale gas prices by oil companies would be to employ "refinery cops" to inspect California's refineries. The inspectors would make sure that refineries operate safely, and are not intentionally shutting down in order to panic markets and increase prices.

GASOLINE PRICE STATISTICS:
(source: UCAN's Cheap Gas Locator)

Price Today = 3.605

Price Tuesday = 3.602

Price last Friday = $3.61

This day Last Month (Feb 28) = $3.491

This day last year = $3.28

Cost of oil last year = $61.79 a barrel or $1.47 a gallon
(equal to 45% of the cost of a gallon of San Diego gas)

Cost of oil this year = $105.62 a barrel or $2.51 a gallon
(equal to about 70% of the cost of a gallon of San Diego gas)

Crude Source Energy Information Agency For more information or background, contact Charles Langley or Michael Shames.

Rising diesel prices may force consumers to go on a diet

Laura — Tue, 18 Mar 2008 14:37:01 -0700

UCAN In the Media

Analyst: Cost of Food to Climb as Diesel Fuel Tops $4 Per Gallon

Erik Anderson, KPBS Radio

Mar 11, 2008

San Diego’s average price for a gallon of gasoline is up to $3.57 a gallon. The Utility Consumer's Action Network tracks local prices at hundreds of filling stations.

UCAN’s Charles Langley says the local price jumped three cents a gallon since last Friday and he thinks it will continue to go up.

Langley says the price of oil on the international market appears to be driving prices at the gasoline pump.

Langley: The on the spot price, which is why they call it the spot market, is tracking very closely with oil prices on the futures market. So we're literally paying tomorrow's price for gasoline today.

Langley says the price of diesel fuel topped $4 a gallon today. He says that’ll drive up the cost of food and consumer goods because they’re shipped by truck.

Businesses feel effects of higher gas prices

Laura — Mon, 17 Mar 2008 12:37:43 -0700

UCAN In the Media

Rising Gas Prices Pumping Up the Cost of Doing Business

By JAIMY LEE

San Diego Business Journal Staff

Posted March 17, 2008

Average gas prices will likely reach well into the $3.60s this week, analysts say, forcing local businesses that depend on the roadways for revenue to deal with higher costs.

The average price in San Diego for a gallon of unleaded regular gas was listed at $3.53 as of March 10, jumping 5 cents the next day and continuing to rise into midweek.

A fuel tracker survey produced by the nonprofit Utility Consumers’ Action Network placed the low price at $3.19 in La Mesa and San Carlos and the high at $3.93 in Pacific Beach on March 10.

“It’s very expensive to do business in California,” said Scott Alevy, spokesman for the San Diego Regional Chamber of Commerce. “Whether it’s health care costs, the costs of utilities or the cost of gas.”

As for the buzz that $4 per gallon of gas will be the norm by the start of summer, the market may steady itself before then, according to Charles Langley, a gas analyst with UCAN, a San Diego-based consumer watchdog. He did note that the price of diesel hit $4 a gallon last week and that current prices are being driven up by speculation.

“Some days it looks like it’s around the corner,” he said of $4 a gallon. “Other days it seems far away.”

While San Diego gas prices are usually about 10 cents higher than those in Los Angeles, the two cities were at a parity March 10, with Los Angeles’ average price reaching $3.52 — something that could be a good sign for the volatile market, Langley says.

On March 10, 2007, the average price hovered around $3.10 for unleaded gas in San Diego, he says.

Business Effect

Organic To Go Food Co. Inc., a Seattle-based organic retail and delivery chain, has not been affected much by rising gas prices, says Jason Brown, chief executive officer and founder.

Although 40 percent of revenue comes from its catering division, the three-year-old company uses a hybrid fleet of Toyota Priuses and Scions, as well as strategically placed commissary kitchens, to minimize fuel use.

“Gas has been rough for a couple of years,” said Brown, whose company has eight Organic To Go cafes and one commissary kitchen in San Diego County. “It’s not really affecting us. We planned for it.”

It’s a mind-set shared by delivery powerhouse UPS. Conservation practices introduced years ago are keeping costs lower for the Atlanta-based package delivery company.

The company maintains a fleet of 1,600 alternative fuel vehicles as well as route-planning technology that puts drivers on a more effective right-hand loop, says Karen Cole, spokeswoman for UPS. The company also buys fuel in bulk and maintains its own filling stations.

Just Another Worry

At the Van Ommering Dairy Farm in Lakeside, conservation has been squeezed as far as it can go for owner Dave Ommering.

He says rising prices for diesel, used to fuel the tractors and hay trucks, and higher feed costs have caused concern for him. Corn prices have gone up 40 percent in the last six months.

While the cost of fuel is still critical, he said that it’s “just another cost for us,” especially compared with feed prices.

Langley said March 10 that consumers have been playing the proper role by shaving off personal gas allotments, but panic and speculation are what have driven prices to a national record.

Marie Montgomery, a spokeswoman for the Automobile Club of Southern California, agreed with Langley’s statement about the volatile market and speculation driving up prices.

“We’re literally paying future prices,” Langley said.

Diesel breaks $4-a-gallon barrier

Laura — Fri, 14 Mar 2008 13:49:08 -0700

UCAN In the Media

Gas rockets to new records

By CHRIS BAGLEY

North County Times Staff Writer

Thursday, March 13, 2008

Fuel prices hit record highs in North County and across the United States on Thursday, with diesel fuel's blitz past the $4 mark foreshadowing a cruel summer for consumers of everything from picture frames to breakfast cereal.

The average price of regular gasoline in the area surged 8 cents from last week, to $3.57, according to a weekly survey by the San Diego-based Utility Consumers' Action Network. Diesel fuel, which is used to transport most consumer goods to market, shot up a whopping 16 cents, to $4.07.

Diesel prices have rocketed even past the swiftly rising price of regular gas in the last year, driven by higher demand overseas and tougher air quality standards in California.

Both fuels have spiraled upward in cost since late January amid rising oil prices and an ever-weaker U.S. dollar. Light sweet crude for April delivery edged up 41 cents Thursday to close at a record $110.33, up from below $100 at the beginning of the year. Analysts blame the increase partly on weakness in the dollar, which traded at yet another low of $1.56 against the euro Thursday. Interest rate cuts further weaken the dollar, and analysts expect another one Tuesday at a meeting of the Federal Reserve.

Diesel prices have skyrocketed more than $1 in the last 12 months. That has clobbered the trucking industry, one company owner said.

"They're killing us," said Keith Hardin, who owns Escondido-based Hardin Trucking. "I'm sure a lot of people are going broke."

If diesel stays near $4 for the next few months, Hardin said, he'll have no choice but to raise his fuel surcharges ---- now in the 10 percent to 20 percent range ---- up to 30 percent, a level that would still leave his company less profitable than it was a year ago.

Charles Langley, a fuels analyst for the consumer group, said the extra increase in diesel fuel probably owes a lot to new state regulations that have permitted only ultralow-sulfur diesel since September 2006.

Diesel's greater popularity in fast-growing economies such as China and India may also be contributing to the disproportionate rise in its price, said Susanne Garfield, a spokeswoman for the California Energy Commission.

Michael Noel, a UC San Diego economist who studies drivers' responses to higher fuel prices, said businesses in trucking and other industries that rely on diesel have very little room to conserve further, a stark contrast to consumers who can sometimes car pool or cut back on weekend outings to Disneyland or the desert.

Noel said he expects the trucking industry to keep its profits fairly stable in the long run by passing most of the fuel costs on to their customers and ---- ultimately ---- to the people who buy bread, car wax, and most other items.

Consumer prices have risen by an average of 4.3 percent in the last year, according to the U.S. Bureau of Labor Statistics, an increase that overshadows smaller increases in most workers' wages. When food and energy prices are ignored, inflation has been running at about 2.5 percent.

Noel said many retail business will factor the higher transportation prices into a single, dramatic markup in April, May or June.

"Consumers get annoyed at all the nickel-and-dime stuff," he said.

The Associated Press contributed to this report. Contact staff writer Chris Bagley at 760-740-5444 or cbagley [at] nctimes [dot] com.

Speculation may be fueling rising gas prices

Laura — Thu, 06 Mar 2008 11:02:31 -0800

UCAN In the Media

Summer blend is in pipeline as gas prices continue rise

By Dean Calbreath

UNION-TRIBUNE STAFF WRITER

February 26, 2008

The price of gasoline shot up 5 percent during the past week in San Diego County, hitting its highest level since early December as gas prices throughout the country surged toward record highs.

Unleaded regular hit an average of $3.354 per gallon in the county yesterday, compared with $3.186 a week before and $3.058 a month ago, according to the Utility Consumers' Action Network, or UCAN, which tracks energy and utility prices.

If the current trajectory holds, San Diego could surpass its record of $3.50 per gallon within the next nine days, UCAN gasoline specialist Charles Langley said.

“Hopefully some sanity, some rationality, will return to the market,” Langley said. “But at this rate of increase, which to me will be hard to sustain, we could break the all-time record by next Thursday.”

Economist Severin Borenstein of the University of California Berkeley said he would not be surprised to see the statewide price top $4 this year. But he said that a more likely peak price would be between $3.60 and $3.75 – still a record high.

Gasoline prices typically rise at this time of year, as refineries transition to a more expensive summer blend of gas. This year, Friday is the deadline for putting the summer blend onto the market, meaning that refineries began changing to the blend in mid-January, leading to an increase in price.

“The changeover (to the summer blend) involves an enormous number of refineries, tanks and pipelines,” said Joseph Sparano, president of the Western States Petroleum Association in Sacramento. “That can have an effect on supply, which can make things more expensive.”

Other observers say the switch to the summer blend cannot explain the recent price rises.

“We always expect to see a climb in the spring, which might be part of what's happening now,” said Jeff Spring, a spokesman for the Automobile Club of Southern California. “But the thing is that we didn't ever drop this year to the point where we've dropped in previous years.”

Spring said part of the reason for the price rise is speculation in the marketplace.

“It seems like speculators and investors have found enough reason to keep the price of oil elevated,” he said.

Throughout the nation, energy prices have been rising. Crude-oil futures, which receded late last week after spiking higher than $101 on Wednesday, neared $100 again during trading yesterday.

By the end of the day, the price slid to $99.23 – 42 cents above its opening price.

Gasoline prices do not always rise in tandem with oil futures. It typically takes 90 to 120 days for prices of oil futures to be reflected in the price of gasoline, partly because it takes about three months for oil to be refined into gasoline.

By that token, today's gasoline prices should be keyed to the price of oil in November and December, when prices were hovering at about $60 per barrel.

Instead, gasoline prices have been rising in tandem with the oil futures. Gasoline hit a national average of $3.115 per gallon Friday, its highest since early June, according to the AAA and the Oil Price Information Service.

“The only encouraging thing I hear from oil traders is that if you get a run-up in prices this sharp, you can also get an equally sharp decline,” UCAN's Langley said.

Borenstein, the University of California Berkeley economist, said it is hard to predict what will happen with gas prices. Even though the U.S. economy is weakening, demand for oil continues to grow in other areas of the world, pushing prices higher.

“Right now, we're at a point where there isn't much capacity (for supply to match demand). And when you don't have much capacity, this kind of spike can happen,” he said.

Dean Calbreath: (619) 293-1891; dean.calbreath [at] uniontrib [dot] com