California Facing $5 Gasoline Stirs Brown To Relax Rules

Gasoline closing in on a record $5 a gallon prompted Governor Jerry Brown to direct California regulators to relax smog controls so oil refineries could increase supplies of cheaper fuel. Retail prices began to skyrocket after Exxon Mobil Corporation’s 150,000-barrel-a-day refinery in Torrance, near Los Angeles, reduced production October 1 after a power failure. Regular gasoline in California surged to an average $4.668 a gallon, an all-time high and twenty-two percent more than the U.S. average, according to data from October 8 from AAA, the nation’s largest motoring organization. Some stations were charging as much as $5.89 in the Big Sur area.

The California Air Resources Board granted refineries permission to make an early shift to winter-blend gasoline, typically not sold until after October 31. Due to the composition of the gasoline, refiners can produce more of the winter blend than the summer blend.

California’s average price for regular jumped 50 cents a gallon in a single week. That made it at least $1 a gallon higher than in a dozen other states: Alabama, Arkansas, Georgia, Louisiana, Missouri, Mississippi, New Mexico, Oklahoma, South Carolina, Tennessee, Texas, and Virginia, according to data provided by AAA.

U.S. Senator Dianne Feinstein, a Democrat from California, sent a letter to Jon Leibowitz, Chairman of the Federal Trade Commission, asking for an immediate investigation into whether supply was being manipulated for profit. "California commuters are facing the highest gas prices and the longest commutes in the country," Feinstein said in a statement. "Paying hundreds of dollars to fill your tank every time you go to the pump is untenable, particularly because it does not appear the price spike and supply disruption are in any way related to supply and demand."

California is dependent on its own refineries for gasoline because the state is mostly cut off from oil-products pipelines spanning the rest of the country. Refiners outside California are generally not equipped to supply the cleaner-burning gasoline required in the state.

Retail prices shot up after the refinery in Torrance reduced production. That followed a fire that knocked out a crude-processing unit at Chevron Corporation’s plant in Richmond, near San Francisco, in August and the shutdown of a Chevron pipeline that delivers crude to Northern California because of contamination.

The change may increase California’s fuel supply by eight percent to ten percent with only a "negligible" impact on air quality, Brown said.

Winter-grade gasoline is about 15 cents to 20 cents a gallon cheaper to blend and refiners can quickly and easily make the switch.

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