More Gas, Lower Crude Prices May Not Fuel Savings at Pumps

After a series of refinery fires and accidents limited gasoline production and sent pump prices soaring earlier this year, California’s oil refiners made record amounts of gas last month, raising expectations that prices at the pump would head down.

But any relief for motorists may be slight or short-lived, experts warned. The state’s gasoline stockpiles are still relatively low, and the start of the traditional summer driving season begins Memorial Day weekend, a time when prices typically begin to rise in response to increased demand.

Eight unplanned refinery outages caused by fires or accidents reported from late January through the end of March created an 11% average daily shortfall in gas supplies, the California Energy Commission said Friday. Although crude oil prices have dropped to under $20 a barrel from $24.49 at the start of the year, the decline has yet to be passed on at the pump.

Jim Huccaby, pricing manager for Chevron Products of San Francisco, said crude oil price drops can take up to six months to filter down to the pump.

Consumers may not be in the mood to wait, though. Reflecting the public’s impatience with high gas prices, two bills were introduced in the Legislature last month that would give dealers greater freedom to buy cheaper wholesale gas. San Diego County Supervisor Ron Roberts has proposed forcing major oil companies to divest their company-owned stations, a move he said would foster more competition.

“We want to encourage a level playing field and the opportunity for real gas price competition, and that’s not what we have today,” Roberts said Thursday.

Hopes were raised that pump price relief was in sight when, after steadily increasing output in recent weeks, the 12 California refineries that make the cleaner-burning gasoline required by state law exceeded 1 million barrels in daily production on April 24, the first time ever, according to the energy commission.

That’s a positive sign for consumers, said Severin Borenstein, director of UC Berkeley Energy Institute and professor of business. “If the output of the refineries is back up to full levels, we should be seeing gasoline prices coming down fairly soon, particularly if oil prices stay low,” he said.

So far, though, the increase in production has had a minimal effect at the pump.

Last week, the average price statewide was down just seven-tenths of a penny for self-serve unleaded gas to $1.374 per gallon, according to the commission’s April 25 survey. That was still higher than month-earlier levels.

The state has a tough time making up gasoline shortfalls in part because the mandated reformulated fuel is made outside of California by only three refineries--in Finland, the Virgin Islands and Corpus Christi, Texas.

A decline in the number of California refineries has also had an effect on state gas supplies: Seven of the state’s refineries shut down in recent years rather than make the expensive modifications required to make the cleaner-burning fuel, according to Mike Sarna of Purvin & Gertz, a Long Beach engineering and consulting firm.

“California has become an island,” said one fuel trader who asked not to be identified. “You have fewer and fewer people out there controlling the marketplace.”

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Motorists Over a Barrel

When the price of crude oil goes down and production goes up, the price of gas normally declines, experts say. But pump prices have dipped just a penny in California, where gasoline production, has exceeded demand since April 11 and refineries are operating at record levels. Weekly figures since January:

CRUDE OIL PRICES:

Alaskan North Slope crude prices, dollar per barrel: April 25: $18.76

GAS PRODUCTION:

California refinery production, thousands of barrels per day: April 25: 1,017

RETAIL GAS PRICES:

California average price for regular unleaded, cents per gallon: April 25: 137.4 cents

* Source: California Energy Commission.