Record-high retail prices for gasoline in California began to ease on Wednesday, receding from an unprecedented rally to nearly $5 a gallon, even as further refinery disruptions threatened to slow the decline.
The average price of a gallon of regular gasoline in the state dipped by a half cent to $4.666, according to the AAA Fuel Gauge website, easing from the previous day's record. A dramatic spike in prices began just over a week ago.
While wholesale prices had begun falling last Friday, it took some time for retail rates to follow. Prices are still up more than 45 cents from a week ago, and the premium that California's motorists are paying versus the U.S. average remains unusually wide at about 86 cents.
In Los Angeles, where shortages had been so acute that a handful of service stations stopped selling fuel, average prices remained above $4.90 a gallon. That was among the highest levels in the state, said the AAA, an automobile club. Prices had topped $5 a gallon at many gasoline stations.
Retail prices surged by more than 50 cents a gallon last week and wholesale premiums rose by almost a dollar after a series of refinery mishaps pinched supplies.
Market sources said a possible "short squeeze" that came about when a big refiner was forced to buy fuel on the spot market may also have been a factor.
The spike prompted Henry Waxman, the ranking member of the House of Representatives' Energy and Commerce Committee, to ask the chairman of the Federal Trade Commission to investigate the causes. In a letter to Jon Leibowitz on Tuesday, Waxman said the common explanation for the increase was a gasoline supply crunch resulting from refinery shutdowns.
But Waxman said periods of tight gasoline supplies require vigilance because of opportunities for market manipulation, especially when only a few players hold most of the market share. "When Los Angeles consumers see their gasoline prices skyrocket by 50 cents per gallon over the course of one week, something is wrong," Waxman said in the letter.
The price increase, the biggest in any single state since 2005's Hurricane Katrina, according to the AAA, has unnerved drivers in car-loving California and led the state's two U.S. senators to call for a federal investigation of possible manipulation in the gasoline trading markets.
Average Californian households burn about 100 gallons (378 liters) of gasoline a month at a cost of about $466 at Wednesday's prices, the AAA said.
The price spike eased after California Governor Jerry Brown on Sunday ordered that service stations be allowed to begin stocking "winter-blend" fuel three weeks ahead of schedule, allowing refiners to start making the cheaper blend.
Wholesale prices dropped by 60 cents a gallon on Monday, and analysts said a sharp fall in retail prices would follow within about a week, barring further market disruptions.
But on Tuesday, wholesale prices in Los Angeles jumped by 26 cents a gallon after Exxon Mobil Corp said in a regulatory filing it would move ahead with planned work on its nearby Torrance refinery for the rest of October.
A power failure at the plant tightened supplies and contributed to last week's price surge.
Meanwhile, Chevron Corp said a key unit at its Richmond, California refinery, which suffered a major fire in August and contributed to the supply squeeze, would remain shut through the end of the year - the long end of estimates by industry sources.
(Reporting by Jonathan Leff in New York and Timothy Gardner in Washington; Editing by Dale Hudson and Jeffrey Benkoe)