SAN FRANCISCO (Reuters) - Record-high retail prices for gasoline in California began to ease on Wednesday, receding from an unprecedented jump to $5 a gallon in some areas, even as further refinery disruptions threatened to slow the decline.
More politicians weighed in with calls for regulatory scrutiny of the price spike, which began just over a week ago, while a state senator announced a legislative committee hearing on the matter to be held in San Francisco next month.
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 Tuesday’s record. Gas Buddy, a filling station tracker that updates regularly, also showed state prices down half a penny, at just below $4.65 per gallon.
While wholesale prices started 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 California’s motorists pay 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.
Prices surged more than 50 cents a gallon last week and wholesale premiums rose nearly a dollar after various refinery mishaps pinched supplies. Market sources said a possible “short squeeze” that came about when one refiner was forced to buy fuel on the spot market may also have been a factor.
The spike prompted Henry Waxman, ranking member of the House of Representatives’ Energy and Commerce Committee, to ask the Federal Trade Commission to investigate the causes. In a letter to FTC Chairman Jon Leibowitz on Tuesday, Waxman said the common explanation was shortages resulting from refinery shutdowns.
“SOMETHING IS WRONG”
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 jump, the biggest in any single state since 2005’s Hurricane Katrina, AAA said, unnerved drivers in the car-loving state and led its two U.S. senators also to call for federal probes 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 $466 at Wednesday’s prices, said AAA, an automobile club.
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.
Refiners responded by switching over this week. Kinder Morgan said it would accept winter-blend gasoline for shipment immediately on its 3,000-mile (4,800-km) Pacific pipeline system, having originally scheduled that for October 15.
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 it would move ahead with planned work on its local refinery for the rest of October. A power failure at that plant in Torrance had 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, would remain shut through the end of the year - the long end of estimates by industry sources.
In response, state senator Mark Leno said on Wednesday the Senate Select Committee on Bay Area Transportation would hold a hearing on state refineries and gasoline prices next month.
Leno said the Richmond closure could create problems for the state beyond the pump. “Economists have estimated that a lengthy shutdown of that facility could slow the growth rate of the state’s economy by half a percentage point,” he said.
The supply squeeze also led to a renewed call to block the proposed acquisition of a BP Plc refinery in southern California by Tesoro Corp, unveiled in August.
“If the purchase goes through, Tesoro and Chevron will between them own nearly half of California’s fuel refining capacity, including the three largest refineries in the state,” wrote Liza Tucker, of Santa Monica, California-based Consumer Watchdog, in an October 10 letter to the state attorney general.
Reporting by Braden Reddall in San Francisco, Jonathan Leff in New York and Timothy Gardner in Washington; Editing by Dale Hudson and Jeffrey Benkoe