So much for Detroit and the Little Three chances for this year if this keeps
up through the Summer
Gasoline prices ready to hit new high in S.F.
San Francisco's surging gasoline prices stand poised to smash their old
record of $3.36 for a gallon of regular, perhaps as early as today.
Some stations in the city already have passed that record, set last May.
Although San Francisco's average gasoline price reached $3.34 Thursday,
individual stations were charging as much as $3.98.
And yes, that's $3.98 for regular. Want premium? At least one San Francisco
station was charging $4.18 per gallon.
The national average for a gallon of regular stands at $2.62, up 48 cents
since the end of January. California's average is $3.22, up 70 cents in the
same period. No other state average tops $3 per gallon, although Hawaii
might pass that mark this weekend.
Blame huge refinery profit margins, falling gasoline production, tensions
with Iran and American drivers themselves, who are -- believe it or not --
buying more gas now than they did last year.
Just two weeks ago, it looked like San Francisco and the rest of the country
would finally get a break at the pump. Prices for crude oil, gasoline's raw
material, were falling. Refineries were almost done with their annual spring
maintenance, which temporarily had cut the amount of gas they could produce.
Market analysts predicted that the stunning late-winter run-up in prices
would soon end. San Francisco's average even dropped for a few days.
Then escalating tensions with Iran forced crude oil prices sharply higher,
almost 17 percent in 10 days. Mechanical problems kept hitting refineries
throughout the country and in the Bay Area, shrinking the amount of gasoline
on the market.
Throughout, refinery profit margins on the West Coast remained almost twice
as high as they were last fall, adding to the price drivers pay at the pump.
The difference between what West Coast refiners pay for crude and the price
they charge for refined products has risen to $37 per barrel from about $20
And all the while, drivers kept buying. The country now burns about 1.4
percent more gasoline than it did at the same time last year.
In other words, there's less gasoline available, but drivers are consuming
more than before. The companies that sell it enjoy hefty profit margins, and
they don't have any incentive to cut prices.
"If you can sell, relatively speaking, the same amount of your product at a
higher price than at a lower price, you're probably going to sell at a
higher price," said Sean Comey, spokesman for the AAA of Northern California
Consumer advocates charge that refiners are purposely restricting gas
supplies as a way to drive up the price. They doubt that all the recent
mechanical problems are real or require as much downtime as the companies
say. And they note that no government agency polices refining companies to
make sure their executives are telling the truth.
"They could well be making more money by not producing gas than they do when
they produce gas, which is the scenario we saw in the electricity crisis,"
said Michael Shames, executive director of the watchdog Utility Consumers'
Action Network in San Diego. "When you have a market that's so
dysfunctional, you need to have more oversight."
Still, no one has been able to prove manipulation. And many experts say the
huge margins for refiners simply represent the dynamics of the market, where
supply is squeezed and demand keeps rising.
For all the times California officials have investigated gasoline prices,
they have never been able to demonstrate that refiners are gaming the
market. The state attorney general's office has one such investigation under
way right now but has not reached any conclusions.
"A lot of people have invested a lot of time on this, and a lot of those
people have subpoena power," said Tupper Hull, spokesman for the Western
States Petroleum Association. "And they haven't found anything wrong."
Yet, even some oil executives acknowledge that California's gasoline market
is broken, or at least seriously warped.
The state uses its own unique, pollution-fighting blend of gasoline, made by
a limited number of refineries. That limited supply makes the state prone to
wild swings in price and is one of the main reasons Californians typically
pay more at the pump than other Americans.
San Ramon's Chevron Corp. now controls about one-quarter of the state's
refining capacity. CEO David O'Reilly said the country needs to cut the
number of specialized gasoline blends in use, which would allow gasoline to
flow across state borders much more easily. That, in turn, would minimize
price spikes and give California access to more fuel. He has made that
argument for years.
"I think it's unfair for people to assert that we're trying to take
advantage of something when we've been pointing out, for years, that this is
the wrong way to go," O'Reilly said.
But Chevron, like other local refiners, benefits from California's
perpetually tight market. And when they talk with Wall Street, the company's
executives sometimes boast about how profitable their West Coast operations
have become, even though the vast majority of the company's profits come
from selling crude oil.
"The Chevron brand continues to garner both increased market share and
pricing power in the marketplace," Executive Vice President Mike Wirth told
stock analysts at a conference earlier this month.
Chevron plans upgrades to its California refineries that could increase
their gasoline production by 840,000 gallons per day. And O'Reilly continues
to argue that the government can fix the problem by standardizing gas
"We've advocated for change at a state level," he said. "But advocating and
getting the regulations changed are two different things."
How long will the gasoline price increase last? Analysts say that will
depend on refinery output and the international politics influencing the
price of crude oil.
Refineries elsewhere in the nation are starting to increase the amount of
gas they produce, according to the latest federal government figures, but
California still lags. As for oil, any further saber-rattling between Iran
and the West could easily shove up the price further.
Never hire a Ferret to do a Weasel's job