Gas Spy eye
FuelTracker.com Home Divider1 Gas Spy Login Divider2 Become a Gas Spy Divider3 Crude Reality

Four reasons California gasoline prices are going to increase soon.

For more information, contact Charles Langley 858-752-4600

In the next few days, Southern California gas prices at a handful of 
gas stations might drop a penny or two due to wholesale price fluctations,
but the major trend for this summer is higher prices through mid-June, 
and a return to $4 a gallon much sooner than that. 
 
There are four reasons why gasoline prices will climb in the next 90
days including higher oil prices, increased demand, overseas fuel
dumping (i.e. gasoline exports), and changing fuel blends.
 
Four reasons gas prices are climbing.
 
REASON 1)  Refinery turnarounds.
 
On Saturday the 15th, all of California's refineries were 
required to change their fuel blend to comply with State
and Federal pollution regulations. Dealers have until April
1 to begin selling the new hot-weather blend which evaporates
at a higher temperature than the winter blend. The summer blend 
requires 6 to 10% more oil per gallon of gasoline than the 
winter blend, adding an extra 14 to 24¢ per gallon in costs at 
current domestic crude oil prices.
 
REASON 2) Increased demand
 
As summer approaches, demand for gasoline increases, thereby
driving up the price. This will happen even though demand for 
gasoline has dropped every year since 2006 (see next reason).
 
REASON 3) Exports (i.e. fuel dumping).
 
A few years ago California refineries were complaining that 
they couldn't make enough gasoline to satisfy the demand. This
is no longer true. Now, major refineries are exporting finished 
gasoline or raw gasoline overseas to eliminate surplus. Some 
of these shipments go to Mexico, South America, New Zealand,
Japan, and China. Of course fuel isn't the only thing being 
dumped, U.S. oil will find its way to foreign markets, too, even
though massive increases production from fracking are hampered 
by a lack of pipeline infratructure.
 
REASON 4) Oil prices.
 
The biggest single input cost in a gallon of gasoline is the 
price of oil. In the last month, domestic (WTI) oil has increased from
$93 a barrel one month ago to more than $100 a barrel today. What
this means is that the cost of the oil in a gallon of gasoline is up about
17¢ in the last month.  Even though domestic oil production has
surged, the cost of that oil will probably remain high (see point #3).
In addition, the lack of pipeline infrastructure means cheap oil may not
always be able to find its way to market. Currently, California refineries
get a significant amount of oil from the Bakken, but it is being
shipped via dangerous and messy railroad tank cars, which 
significantly adds to the cost. 
 
Our call? We should see $4 a gallon between April 15 and May 15.
 
In addition to this, we are always just one refinery fire away 
from a major price spike ... especially at this time of year.