Here it is Wednesday and an average gallon of regular has fallen a whopping half a penny, to $4.701. You call that relief? Well, sort of - and you can expect a real drop in prices over the coming days, despite what you might be hearing from a few naysayers who insist that prices are going nowhere fast. The immediate switch to winter fuel will help, as will the reopening of the Torrance refinery. It's true that not having the Chevron refinery in Richmond through the end of the year isn't great news, but the fire that put it out of commission happened in early August and you didn't see prices take off at that point. Actually, prices had been pretty stable (though elevated) for much of September. It was only last week, after an Exxon refinery in Torrance was shut down, that things went south in a hurry. From Bloomberg:
The California Air Resources Board granted refineries permission on Oct. 7 to make an early shift to the winter blend, typically not sold until after Oct. 31. The switch, which allows refiners to produce more gasoline by adding butane to the mix, will take about a week to ease gas prices, said Avery Ash, an AAA spokesman based in Washington. "It's great for alleviating pressure that's been building up, but the relief isn't going to be felt overnight," Ash said by phone today. "You've got stations that have sold up at higher prices because they purchased more expensive products last week. That gasoline has to work its way through the system before the cheaper stuff gets to consumers."
From my weekly Business Update on KPCC:
Steve Julian: So, what does this say about the state's refinery system?
Lacter: It says that the refineries are very old, they're operating at close to full capacity, and because state regulations require that special blend, they can't be supplemented with gas from other parts of the country. And that's why California can be so vulnerable when refineries go down for extended periods.