When will gas prices start coming down?

gasprices5.jpgNot before they peak out, and it might be a while before that happens. A few days, a week, two weeks - it all depends on when the state's refineries get back to normal, or even near-normal production levels. Meantime, look for more price hikes. An average gallon of regular in the L.A. area spiked almost 20 cents overnight, to $4.539, according to the Auto Club. Many stations are well over the $5 mark. The irony is that the price of oil has either held steady or even fallen in recent days. It's not a supply problem - it's a production problem, and it has resulted in skyrocketing wholesale prices, which station operators are partly passing onto consumers. Some backstory from the OC Register:

The trouble began in August, when fire broke out at one of the biggest refineries in the state, a Chevron facility in the bay area; its production still has not fully recovered. Then, earlier this week, a power outage slowed production at an Exxon Mobil refinery in Torrance that, though smaller, produces 10 percent of the state's gasoline. A pipeline that carries oil through the Central Valley also shut down when contaminants were found in it, further crimping gasoline inventories, experts said.

The timing for this is bad. California refiners are still using summer-blended gasoline, which is expensive to produce. Normally, the switchover to the cheaper winter blend happens at the end of the month, but the California Independent Marketers Association has asked state officials to move up that date. No decision has been made. (Seems that Gov. Brown needs to get involved.) This is what happens when you have a limited number of older refineries and those refineries are at full operating capacity and state regulations prohibit importing "dirtier" gas from other parts of the country. There are longer-term public policy issues at play, which everyone is likely to forget about once prices start coming down.


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Mark Lacter
Mark Lacter created the LA Biz Observed blog in 2006. He posted until the day before his death on Nov. 13, 2013.
 
Mark Lacter, business writer and editor was 59
The multi-talented Mark Lacter
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