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UPDATE: Gas prices rise as supply tightens

Posted: February 15, 2013 1:49 p.m.
Updated: February 15, 2013 7:26 p.m.
 

Gasoline prices across Southern California have soared in recent weeks, and further increases may be just around the corner, a petroleum analyst said Friday.

The average price for a gallon of unleaded gasoline in California has increased by almost 50 cents in the past month and now sits at $4.10 per gallon, according to the AAA Daily Fuel Gauge Report.

In the Santa Clarita Valley, prices ranged from $4.05 to $4.33 a gallon on Friday, according to GasBuddy.com, a price-tracking and analysis organization.

The rise has been more meteoric in the Los Angeles-Long Beach metropolitan area than in other parts of California, AAA reported. The price of a gallon of gas has risen 53 cents over the past month to an average $4.22 a gallon, according to the Daily Fuel Gauge report.

The national average is $3.64 a gallon for unleaded gasoline.

Jeffrey Spring, a spokesman for the Automobile Club of Southern California, said this is the earliest he can remember prices rising above $4 a gallon.

Spring said the increase is being fueled, in part, by earlier-than-usual investment activity.

Typically in late February or early March, investors will purchase gasoline futures, a contract in which the investor takes control over a specific amount of gasoline, Spring said.

Investors then can sell these futures for a profit in the summer when prices generally peak, Spring said.

But investor activity can drive the price of fuel up because wholesalers have to compete with investors to buy gas.

Gregg Laskoski, a senior petroleum analyst with GasBuddy.com, said prices rise in late winter in response to the forthcoming shift from winter-grade to summer-grade gasoline.

Summer-grade gasoline contains more added chemicals so that it burns cleaner, Laskoski said. But the summer-grade additives make it more expensive to produce. This is why gas prices typically fall during the winter months.

Refineries are in the midst of selling off their stock of winter-grade fuel, Laskoski said, meaning the nation’s supply of gasoline is somewhat constrained.

West Coast refineries, for instance, are operating at 79.7 percent of their full capacity, said Laskoski, citing figures from the U.S. Department of Energy.

A similar price spike occurred last October, when a series of refinery outages combined with the annual shift from summer-grade to winter-grade gasoline to strain supply on the West Coast, leading to an all-time high average price of $4.70 a gallon in the Los Angeles-Long Beach area, according to AAA.

While Laskoski said he did not anticipate numbers reaching those historic levels during the current price surge, they may come close. He said current projections have gas prices peaking somewhere between $4.35 and $4.65 a gallon between now and April.

“And the way things are going, we are leaning toward the higher end of that estimate,” Laskoski said.
Spring said price increases seem to be leveling off somewhat but are still increasing at a rate of one to two cents a day.

“It’s really hard to say if we’re at a plateau yet,” Spring said. “We’re still seeing a pretty strong upward arc in prices.”

Lmoney@signalscv.com
661-287-5525
On Twitter @LukeMMoney

 

 

 

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