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Gasoline super-spike in progress: Wholesale price for gasoline up 75¢ in four days

This price surge could make Blue voters see Red in California

In San Diego, gasoline prices have jumped 17¢ in four days to an average
price of $4.34 a gallon for regular unleaded, and they could climb another
40¢ by Monday, breaking San Diego's all-time record high.

Meanwhile, the cost of crude oil has stayed flat. Domestic crude prices have
actually dropped by slightly since Monday.

There are excuses for what's happening now, but few good reasons.

Prices at the wholesale level have gone up by 75¢ a gallon since
Monday. Major retailers, like CostCo, and many other independents
are unable to buy fuel or are refusing to pay the outrageous prices
being charged.

Adding fuel to the fire, the cost of domestic oil has dropped by
about 20¢ a gallon since Monday. So oil prices are flat, but gas
prices are increasing at record levels.


Normally, gas prices begin a steady decline at this time of year
because refiners are required to switch over to the Winter Fuel
Blend mandated by CARB, the California Air Resources Board.

What's more, a refinery can actually get 6% more gasoline out of a
barrel of oil for the winter blend. At this time, there is plenty
of gasoline to go around, but it is winter blend gas which can't
legally be sold without violating CARB pollution rules.

Supplies of summer blend, the only blend that can be sold right
now are miniscule because of the fire earlier this summer at a
Chevron's Richmond refinery on August 6. Richmond hasn't recovered
and is under-producing. Meanwhile, Exxon's Torrance refinery is still
flaring (i.e. burning) from an unplanned shutdown last week.

The result is a shortage of summer blendstock, which by law, can
not be replaced with the winter blend until October 31.

Bottom Line: Gas prices are going to scream up like adolescent girls
on a rollercoaster, and then they should scream down.

Finally, there is no excuse for this shortage. The refiners should have
seen it coming and many of them will make amazing profit margins on
gasoline as we move toward October 31 ... and the election.

It is noteworthy that the popularity of incumbent presidents almost
always tracks closely with gasoline prices. When gas prices are high,
the incumbent president's approval ratings drop, and for a state that
tends to vote blue, gasoline blues could make voters see red - especially
if gas prices break the all-time record high for San Diego of $4.64 a gallon
in June of 2008.

Read the editorial on Bush popularity and gas prices.

The players may change but the song remains the same.

This table shows presidential popularity compared to gas prices during
the Bush administration. It was part of a study conducted by UCAN for
an opinion that ran in the North County Times. You can read the original
opinion here