Despite crude oil prices skyrocketing above $54 a barrel last week and shutdowns by several local refineries, gasoline analysts expect pump prices to fall in the weeks ahead.
Late last week, spot market prices fell by 10 cents a gallon on Oct. 14 prompting several gasoline experts to forecast a turnaround.
"We are now in a down market," said Bob van der Valk, bulk fuels manager at Cosby Oil, an independent oil company. "(Retail) prices will start to flatten out at $2.39 a gallon and then come down."
Local gas prices have jumped 30 cents a gallon in the past month, pushing the price of regular self-serve gasoline to an average of $2.35 a gallon in Los Angeles last week 35 cents above the national average, according to the Energy Information Administration. The average price of regular gasoline in California rose 12.9 cents a gallon to $2.33.
As a whole, refiners had been building inventories in anticipation of scheduled shutdowns for repairs or routine maintenance, which currently involve the switch from summer to winter blends. But even with that increased inventory, gasoline prices in California are 52 cents a gallon higher than they were a year ago.
"There's no coordination of any kind going on among the oil companies when refineries or some of their units go down," said van der Valk.
At least one major oil company, BP-Arco (a subsidiary of BP Plc), was forced to purchase gas on California's unregulated spot market to make up for shortfalls in supply. Gasoline producing portions of the BP-Arco refinery in Carson have been shut down for maintenance.
"Certainly the price of oil has something to do with high prices on the West Coast, but California is special," said Denton Cinquegrana, markets editor at the Oil Price Information Service in Lakewood, N.J. "Refiners are not producing at levels they would like to because they're cleaning up equipment."
Price spikes hit California hard because it has stringent regulations that require a special clean-burning fuel that is difficult to make.
Other factors have contributed to higher gas prices, including a September delay in shipments from Alaska, which provides more than 20 percent of California's crude oil. Oil production in the Gulf of Mexico remains 30 percent below normal levels because Hurricane Ivan wreaked havoc with some offshore rigs. Increased demand from China and India has also played a role in the worldwide rise in crude oil prices this year.
For reprint and licensing requests for this article, CLICK HERE.