At $3.11 a gallon San Diego  are at an all-time high for  2009

(editor's note: By noon today, September 7, the average had risen again to $3.114 a gallon)

UPDATE: 9:00 AM LABOR DAY - Gas prices now average $3.108 a gallon in San Diego.

(Scroll down for statistics) Source: UCAN's Gas project at www.fueltracker.com

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As we predicted Thursday,  gas prices have surged over Labor Day weekend to a new average in excess of $3.10 a gallon.  

The spot fuel market represents less than 5% of the gasoline sold in California, but the price of spot fuel has an almost immediate impact on the retail cost.

The "spot" price of gasoline is the price that refiners are charging for gasoline delivered "on the spot."  Typically, this is is generic surplus gasoline that the refinery cannot distribute through its own retail network. Carbob, the fuel sold in California, was in high demand last week as buyers purchased barrels in anticipation of heavy consumer travel over the Labor Day weekend. Most of the buyers of spot market gasoline are jobbers who resell the gas to unbranded stations.

Between Tuesday and Thursday, September 3, the Los Angeles Spot Market experienced extreme volatility at the hands of aggressive buyers who drove the price of Carbob up 20 cents a gallon. Generally speaking, any sustained rally above 8 cents would be considered a "major move" in wholesale prices.

Then, like lemmings leaping over a cliff the major brands followed the spot market's movements and raised prices, too.

Because of the relatively small amount of Carbob available on the spot market, and the fact that retail prices tend to follow the price of spot fuel, it makes the market ripe for exploitation by major refiners.  Ten days ago, for example, UCAN documented that the market for spot gasoline was floundering (see our story Surplus Gasoline: Nobody wants it). We also article also explain how the spot market can easily be manipulated in this article.

Inversion perversion

Most brand-name retail gas stations pay a dealer "rack" price for their gasoline that is set by the refinery. However, stations that are unbranded usually buy their gasoline from jobbers on the open market. Because spot fuel is essentially surplus gasoline, it tends to cost five to 15 cents less per gallon than the gasoline from stations that sell the brand-name stuff.  On rare occassions, the cost of spot fuel is more than the rack price charged to brand-name retailers. This phenomenon is called a rack inversion. Historically, rack inversions are extremely profitable for refineries. Thes inversions are usually created by shutting down a refinery. For a more detailed explanation,, see our commentary "Chevron's annual refinery fire stops price declines."  

Rack inversions are almost always accompanied by retail price spikes  

UCAN's numbers show that as of this morning, the spot price for gasoline has increased 20 cents since Tuesday morning - the largest move in the spot market this year. In addition, wholesale prices are the highest they have ever been this year, which could set the local record for the highest retail price of the year on average.

San Diego Statistics (average prices) from UCAN's Gas Project at www.fueltracker.com

On this day last year, gasoline cost 80 cents more per gallon, and crude oil cost $108 a barrel. That's nearly $40 a barrel more than the cost of oil today at $68 a barrel/$1.62 a gallon.  On a per gallon basis, the cost of the oil in a gallon of gasoline today is almost a dollar per gallon less than last year.*

San Diego average gas price as of 9:00 AM today, September 7 = $3.108 a gallon.

Gas price September 4, = $3.055

Gas price, September 3, 2009 = $3.032

Gas Price last Friday, August 28, = $3.04

One Month ago - August 4, 2009 = $2.93

Two Months ago - July 4, 2009 = $2.975

Three Months ago - June 4, 2009 = $2.876

Six months ago - February 4, 2009 = $2.16

Lowest price this year = January 1, 2009 = $1.86

Price this day last year, 2008 = $3.84

Highest price this year, August 13, 2009 = $3.08

*There are 42 gallons of oil in a barrel. The cost per gallon of OIL this day last year was $2.56. The cost per gallon of oil in a barrel as of this morning, was $1.62.

For more information, contact Charles Langley, UCAN Gasoline Project Manager, at 619-696-6966, Ext. 656

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