Gas Price Increases: The Economy Must Be Improving

[LPH]

The economy must be getting better!

Have you noticed that each time a good jobs report is released that gas prices skyrocket? People on the west coast are being skewered by 12 cent leaps each evening as retailers are adjusting prices with each new delivery. Some stations are now offering gasoline above $5. Some stations are closing.

As stated in an LA Times article, "Economists warn that a prolonged period of elevated gas costs could harm consumers as the holiday shopping season kicks in."

No kidding. Isn't that the plan?

View on the Blog

 

[Paul]

It's quite the coincidence that this happens every time. Is there a graph somewhere comparing gas prices to economy reports?

 

[Robert Heiny]

Even if the economy gets better, I wonder at what cost to those of us who rely on private transportation to go to the discount malls. I can't afford to drive across the deserts of SoCal to Disneyland, the Happiest Place on Earth, until it does drop.

As I understand, California's fuel costs are rising because the state requires a different blend of fuel additives in the winter from in the summer. Apparently, not enough winter mix has been available to satisfy demand for fuel.

So, car drivers in California have the privilage of paying higher prices for gasoline. I wonder if the price will drop after elections in November?

 

[LPH]

Last night Governor Brown signed an exception so that gasoline with the winter blend may go on sale now. This should change the amount of fuel available. It'll take a few days before prices should start to decrease. Prices always fall slower than they rise

Governor Brown Urges Action to Reduce Gas Prices


10-7-2012

SACRAMENTO -- Governor Edmund G. Brown Jr. today directed the California Air Resources Board (CAR to take emergency steps to increase the state's gasoline supply and bring down fuel prices.

The Governor directed the board to immediately allow oil refineries to make an early transition to winter-blend gasoline. Winter-blend gasoline typically isn't sold until after October 31.

"Gas prices in California have risen to their highest levels ever, with unacceptable cost impacts on consumers and small businesses," said Governor Brown. "I am directing the Air Resources Board to immediately take whatever steps are necessary to allow an early transition to winter-blend gasoline."

Winter-blend gasoline is a mixture that evaporates more quickly than the gasoline sold in summer months, which takes longer to evaporate and is better for air quality during the smog season. Allowing an early transition to winter-blend gasoline could increase California's fuel supply by up to an estimated 8-10 percent with only negligible air quality impacts.

Gas prices in California have skyrocketed over the past week due to a tightening of fuel supplies caused by shutdowns at Tesoro and Exxon refineries. The Exxon refinery came back online Friday and Tesoro is scheduled to resume production early next week. Combined, these actions are expected to stabilize and reduce fuel prices.

The text of the Governor's letter to the California Air Resources Board (CAR is below:

October 7, 2012

Mary Nichols, Chairman
California Air Resources Board
1001 I Street
Sacramento, CA 95812

Chairman Nichols:

California is temporarily experiencing tight gasoline supplies that are causing dramatic spikes in the price consumers must pay to fuel their vehicles. Gas prices in the State have set new record highs, and gas is completely unavailable at some stations in southern California. If this situation continues, it may cause unacceptable price impacts for consumers and small businesses, significant economic disruption, and serious harm to public safety and welfare.

California refiners are required to produce a summer-blend gasoline through October in most areas of the State. After October 31, a winter-blend gasoline is allowed. Due to the composition of the gasoline, refiners can produce more of the winter-blend than the summer-blend.

In light of the tight gasoline supplies and resulting price spikes, we should not wait until the end of the month to start production of our winter-blend gasoline. Allowing refiners to make an early transition to winter-blend gasoline could quickly increase fuel supply and provide a much needed safety valve with negligible air quality impacts. Accordingly, I am directing that the Air Resources Board immediately take whatever steps are necessary to allow for an early transition to winter-blend gasoline to be manufactured, imported, distributed, and sold in California.

Edmund G. Brown Jr.
Governor

 

[Robert Heiny]

Ah, prospects for getting to Disneyland may improve.

 

[LPH]

Ah, prospects for getting to Disneyland may improve.

I suspect prices will decrease at a slower pace than the increase.

 

[LPH]

After a week, prices have only gone down approximately a penny a day. Why? The phenomenon is called price asymmetry. Price asymmetry is the well studied quick price increase of gasoline but the slow decline.

Who is to blame? The latest is that the fault belongs to the consumer. Because consumers buy the higher priced fuel then retailers keep the price inflated. To bring the price down then stop buying the fuel.

 

[Robert Heiny]

As I understand from a TV news report over the weekend, the volume of gasoline consumed has dropped, but no explanation was given for why. California fuel has $0.50 more state taxes than AZ, so that makes it easier to exceed $5/gallon in CA than in AZ. I'm encouraging candidates for public office who have say to return to $2/gallon fuel.

 

[LPH]

The price actually exceeded $6 in some areas

On an important tangent - I use Gas Buddy on my iPhone to watch gas prices. This allows me to find the least expensive gas in the area. This must be balanced out with driving to that location for the fuel. Also - whether or not I will purchase from them - Sorry Sam's Club - but that is a big NO. Also, a few stations add 3 cents for using a debit card.