"For Info on the Gas Price Problem, Go Elsewhere"
Posted by the ChronWatch Founder, Jim Sparkman Tuesday, March 18, 2003
What should we make of current gasoline prices? We have a governor who assumes every energy problem is the result of gouging by greedy oil companies. And he says so repeatedly, just in case California's reputation as the most anti-business state begins to slip. He admits he has no proof, but says it anyway. What a stateman! Destroying California's business reputation is one job he has done well.
On the other hand, the Chronicle doesn't have a single soul on the staff who can add anything of any value to our understanding. The Chron ranks are filled with journalists who don't know anything about anything. As the song in the GM commercial goes, ''Nothing from nothing is nothing.'' As a result, they are forced to write article after article by quoting ''experts say'' and ''critics say.'' By definition, that's the only contribution they can make. Of course, they throw in their bias in imitation of the governor.
So, we have to go elsewhere for real information. This article is from the Wall Street Journal, written by Alexei Barrionuevo.
Oil prices are sliding as more crude moves toward a thirsty U.S. market, but gasoline prices aren't expected to follow them down anytime soon.
The reason: tight crude-oil supplies and production problems, particularly on the West Coast.
In California, where prices now average $2.08 a gallon, gasoline supply continues to be dogged by refinery-maintenance issues and complications surrounding the production of a new ethanol-gasoline blend.
Nationally, gasoline prices are expected to reach highs, before adjusting for inflation, when the latest survey comes out Monday. They most recently averaged $1.71 a gallon of regular, just below the previous record. A prolonged oil workers' strike in Venezuela this year and fears about the impact of a possible U.S. invasion of Iraq have contributed to the bulk of the price run-up.
Inventories have dropped dangerously low in some parts of the country and will be hard to replenish quickly. The crude on the way from the Middle East won't help inventories for a month or more, and weeks more will pass before the oil is refined into gasoline and transported to service stations. The Energy Information Administration, an arm of the Department of Energy, predicts that pump prices will peak at $1.76 this year.
In California, the mix of problems are ''adding up,'' said Joanne Shore, a senior analyst for the Energy Information Administration. Refiners in the state are struggling to comply with new rules requiring them to switch to a new fuel mix that uses corn-based ethanol rather than MTBE, a common gasoline additive produced in refineries that has been linked to some environmental problems. While refiners produce MTBE, or methyl tertiary butyl ether, and blend it into gasoline early on, ethanol must be added at the end of the process. And because less ethanol is required per gallon than MTBE, refiners are producing, overall, less volume.
''The potential for spikes today are greater today because we are starting the season with lower inventories and the voluntary switch is removing volume from the market,'' Mr. Goldstein said.
During a protracted political battle over ethanol use, California's Energy Commission and outside consultants warned of potential complications with the transition. But refiners comprising about 80% of California's gasoline production voluntarily decided last year to switch to ethanol one year ahead of a federally mandated changeover, believing they could make the transition smoothly.
California also is short of refinery production. Some 10% of the state's production is sidelined for annual maintenance work. BP's Carson refinery, which supplies about 25% of Los Angeles's gasoline, is a week late in returning from 50 days of planned maintenance. A BP spokeswoman said the long-planned maintenance work cost almost $100 million. ''We are working 24 hours a day to get the plant back up because we realize its importance to the market,'' the spokeswoman said.
The problems are producing some unseen price discrepancies. The average pump price in San Francisco has risen to $2.27, the highest level in the country, according to the American Automobile Association.
Write to Alexei Barrionuevo at alexei.barrionuevo@wsj.com