No quick answers for higher gas prices

Cost per gallon rose about 14 cents in 1 week

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By Craig D. Rose
UNION-TRIBUNE STAFF WRITER
March 1, 2007

The stock market may have stumbled this week, but gasoline price increases continued unabated.

The average price of regular gasoline in San Diego has risen to $2.84 per gallon, up nearly 14 cents in a week, according to the Utility Consumers' Action Network.

One year ago, gas prices in San Diego were 33 cents per gallon lower than they are today, said Charles Langley, who oversees gasoline monitoring for UCAN, a local watchdog group.
"We have never seen prices this high in February," he added.

Langley said the higher costs could not be justified by the price of crude, the commodity from which gasoline is refined.

Crude oil prices last year at this time were higher than now – $67.56 per barrel versus $61.79 for benchmark crude on the New York Mercantile Exchange.

All things being equal, this year's nearly $6 per barrel cheaper crude oil should have lowered the cost of producing gasoline by about 14 cents per gallon.

The petroleum industry has long said that crude oil costs are just one factor in gasoline pricing, the others being supply and demand.

While the Western States Petroleum Association – a trade group representing refiners – did not return calls, the California Energy Commission said it had identified some factors that could be responsible for higher pump prices.

Susanne Garfield, a commission spokeswoman, said some refiners have had difficulty returning to full production, after transitioning their facilities to produce the summer blends of gasoline required by state regulation.

The loss of production, she added, has caused suppliers to dip into inventories and sent others to the spot gasoline market for purchases they otherwise would not need.

Garfield said the state generally produces about 90 percent of the gasoline it consumes, requiring imports to fully satisfy demand.

“We live on the edge, and one little glitch will drive up wholesale prices,” Garfield said.

The energy commission's weekly gasoline report reported a decline of 0.3 percent in gasoline inventories for the week ended Feb. 23. But the report also indicated that gasoline production rose about 8 percent during the same week.

Garfield said the production increase could be misleading because the state has been producing gasoline at below adequate levels.

“I can't explain the gasoline price increase, but I can give you some of the factors that may be involved,” she said.

Langley, of UCAN, said there was another factor at work. He and other consumer advocates maintain that a small number of petroleum companies have a stranglehold on refinery capacity, which allows them to manipulate prices for their profit.

“Yes we have refinery turnarounds and yes we produce less gasoline now that we have shifted to summer blends,” Langley said, “but there is no good reason why our gas is costing 30 cents more this year than last.

“It really appears to be a tremendous amount of gouging.”

The federal Energy Information Administration reported this week that gasoline prices nationwide rose to $2.38 per gallon, up about 9 cents in a week and 13 cents higher than last year at this time.

Prices throughout California increased to $2.80, 9 cents higher than the previous week and 36 cents above last year, according to the EIA.

Aside from the West Coast, which had a 28-cent increase, the next highest increase was seen in New England, where prices climbed to $2.36, up 9 cents in a week and 14 cents higher than last year.