Gasoline price spikes are natural, says commission

Silicon Valley Business Journal 9:56 AM PST Wednesday 

There are no evildoers skulking behind closed doors plotting to send California gasoline prices to record highs, the California Energy Commission says in a report released Wednesday.

Instead, the high prices are due to a confluence of demand, converting refineries to make summer-grade gasoline and crude oil price increases prior to the state of the Iraq conflict, the commission says.

"The Energy Commission has found no evidence that distribution problems or delays ... were intentionally planned to manipulate gasoline prices. An investigation by the Attorney General does not appear warranted at this time," the report says.

What primarily drove this year's increases to record-setting levels was the unusually high cost of crude oil on the world market, the CEC says. The price of crude oil nearly doubled in the past year due to market uncertainty about the threat of war in the Middle East, it notes.

Other factors included an oil strike in Venezuela that drastically cut supplies and a cold winter in the Eastern United States that increased the need for heating oil, it says.

"As long as demand for transportation fuels continues to grow, California's gasoline supply will be subject to price spikes," the report says. The statewide average retail price of regular gasoline jumped 36 percent, climbing from $1.58 a gallon on Jan. 1 to a record-setting $2.15 a gallon on March 17, an increase of 57 cents. The average on April 2 is $2.16, with San Francisco still boasting the nation's highest average at just over $2.26.

With Californians consuming nearly 1.1 billion gallons of gasoline each month, a 57-cent-per-gallon increase costs consumers more than $20 million per day.

At maximum production, in-state refineries make more than 44 million gallons of gasoline a day. But to meet demand, gasoline retailers import an estimated 100 million gallons of gasoline and blend stocks each month, according to the commission.

"Unanticipated production difficulties or distribution problems can tighten the market and drive up prices before additional supplies can arrive by ship from distant refineries, which can take three to six weeks," the commission's report says.