News Column

Gas Prices on the Rise Again

Jan. 29, 2013

Gary Richards, San Jose Mercury News

Jan. 29--Get ready to pay a few more bucks for gas.

Prices are again on an upward march in California -- and could hit $3.80 to $3.95 a gallon by Valentine's Day -- as refineries across the state convert to the more expensive summer blend of fuel while coping with sporadic outages.

The statewide average stood at $3.68 Monday, and that was up 12 cents from a month ago, according to AAA. By the end of this week, that figure should be several cents higher.

"It looks bleak," said Senior Petroleum Analyst Patrick DeHaan of GasBuddy.com. "Spot prices continue to jump and could rise another 10 to 25 cents a gallon over the next week or two."

Petroleum Industry Analyst Bob van der Valk noted Monday that gas in Los Angeles had gone up 15 cents a gallon and gas in the Bay Area had gone up six cents overnight.

The increases are related to the state's annual switch from winter to summer gas, a blend of fuel used from April to Oct. 31. To prepare for the switch, refineries start drawing down supplies now and complete maintenance upgrades.

The change will reduce overall supplies by 10 percent, while warmer weather leads to more driving and higher demand.

In addition, BP reported a power failure at its Carson refinery near the Los Angeles harbor, the second-largest in California. Although power has been restored, two units at the 266,000-barrel-a-day plant were off line for two days.

And Valero's 78,000-barrel-a-day Wilmington refinery near Los Angeles plans a partial shutdown next week for maintenance.

"It won't get to $4.50 again, will it?" asked Fran Munson, of Fremont, referring to the highest price she recalls paying last year, when records were shattered following several refinery problems statewide.

She paid $3.69 at a Chevron in Hayward on Saturday, a dime more than a week earlier. As for her fear of $4-plus gas, that could be a reality by Memorial Day, DeHaan said.

San Francisco-area drivers, for once, were not paying the most for gas in California. Los Angeles' average price of $3.77 was five cents more than San Francisco's, as the BP refinery shutdown sent prices there soaring.

Drivers in the South Bay were paying $3.64, a penny more than those in the East Bay. The national average was $3.35.

Despite the anticipated forecast, the American Petroleum Institute predicts that the average price for 2013 should be 20 cents a gallon lower than last year across the country.

The reason: We are burning less gas and producing more.

U.S. oil demand fell to the lowest level in 16 years in 2012 as economic growth weakened while domestic output surged. A combination of horizontal drilling and hydraulic fracturing has unlocked supplies trapped in shale formations in states including North Dakota, Texas and Oklahoma.

The Associated Press and Bloomberg contributed to this report.



Source: (c)2013 San Jose Mercury News (San Jose, Calif.) Distributed by MCT Information Services


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