Gas prices have climbed almost 60¢ in San Diego since last Monday, 

and 40¢ over the weekend. If the current price hike is sustained 
it could cost the average commuter an estimated $400 to $750 a year.

In response, Governor Brown has ordered CARB, the California Air Resources
Board to allow refineries to sell their inventories of winter blend gasoline,
claiming that it will improve reserves of gasoline by as much as 10% and
alleviate the alleged shortage of fuel in California (see LETTER to CARB here).

Winter blend gasoline vaporizes quickly when temperatures exceed 100
degrees farenheit. Because the winter blend can literally boil away into the
atmosphere as vapor on a hot day, CARB usually does not allow it to be sold
until after October 31, when the weather is less hot (click here for an
explanation of Reid Vapor Pressure).

Meanwhile, Senator Feinstein has asked the FTC, the Federal Trade
Commission to investigate California's refining industry to see if this
 unprecedented price hike was the result of unlawful market gaming by
the oil industry. Historically, the FTC has been lackluster in its efforts to
ensure a free market in California. Meanwhile, California refiners have been 
exporting gasoline overseas to keep supplies tight on the West Coast.

With gas prices at an all-time inflation adjusted high of $4.72 a gallon, the
strategy seems to be working. 

 

In June, 2008, oil prices spiked to $147 a barrel, and gasoline in California

reached the previous record high of $4.64 a gallon on average. Yet this
morning that same oil (WTI) was selling on the New York Exchange 

at $89.00 a barrel. On a per gallon of gas basis, the oil in your gasoline 
costs 88¢ less per gallon than it did in 2008. In other words, this is not

an oil shortage, it is an alleged gas shortage, and it is happening only in

California. 

 

On Thursday, UCAN predicted that gas prices could increase as

much as 40¢ by today. Gas prices have increased by 39.7¢

 

 

Even when you adjust for inflation, the current average gas price

highest in U.S. history since World War One. According to InflationData.com

the highest U.S. average for gasoline was an inflation-adjusted $3.75

a gallon in 1918, and $3.37 a gallon in 1981.

 

 

Wholesale prices drive retail prices.

 

On Saturday, the wholesale prices being charged to unbranded dealers --

dealers who must purchase surplus fuel on the open market -- had dropped.
However, many wholesalers are posting a "lower" price, but aren't selling 
fuel, so the price reduction creates a statistical illusion of a downward 
moving market.

 

UCAN's gas project tracks selected wholesalers, and our average on Saturday
showed a decrease of 23¢ a gallon since Thursday, but this huge downward
move is still a minor decline from a Mount Everest style price spike of 75¢ since

Monday. When the wholesale prices charged to both branded and unbranded
dealersare accounted for, the price increase in the last week Monday has been

a monstrous 49¢ - roughly 42¢ on average for brand-name retailers and

40¢ for unbranded.

 

Our analysis shows that given current wholesale prices, an unbranded

independent dealer must charge a minimum price of $5.10 to $5.25 a

gallon in order to break even on a wholesale gasoline purchase after

paying for local, state and federal taxes.

 

At this time, brand name dealers are able to buy gasoline -- if it is

is available -- for as much as 50¢ less per gallon than unbranded dealers.

 

Normally, unbranded dealers are the price-cutters in the marketplace:

They force the major brands to compete on price. At this time, there is no

price competition to force brand name dealers to lower their prices. As

a result, prices are likely to continue rising until competition returns.

 

On Thursday, UCAN predicted that gas prices could increase by as much

as 40¢ a gallon by Monday, October 8. Currently, San Diego is just 4¢

away from making that prediction a reality.

 

x~~-~~x~-~~x~~~~~x~~-~~x~~-~~~x~~-~~x~-~~x~~~~~x~~~~~~x~~-~~~x~~~

San Diego	CHANGE	10/8/2012	10/4/2012	Monday
		MONDAY	THURSDAY	10/1/2012
SD RUL	$39.7¢	4.72	4.328	4.162
SD DSL	4.5¢	4.500	4.455	4.431

 

x~~-~~x~-~~x~~~~~x~~-~~x~~-~~~x~~-~~x~-~~x~~~~~x~~~~~~x~~-~~~x~

Southern California  AVERAGES
		10/4/2012	10/4/2012	Monday
CHANGE (lst rpt)		SATURDAY	THURSDAY	10/1/2012
0.3620	San Diego RUL	4.690	4.328	4.162
0.0450	San Diego DSL	4.500	4.455	4.431
0.3140	Los Angeles RUL	4.661	4.347	4.184
0.0410	Los Angeles DSL	4.541	4.500	4.476
0.3200	Orange Cnty RUL	4.650	4.330	4.162
0.0370	Orange Cnty DSL	4.493	4.456	4.442
0.3230	San Bern RUL	4.621	4.298	4.146
0.0340	San Bern DSL	4.479	4.445	4.410
		AVERAGES	AVERAGES	AVERAGES
0.3298	SOCAL RUL	4.656	4.326	4.164
0.0393	SOCAL DSL Avg	4.503	4.464	4.440