9-17-08 by dugan
California, usually at the top of the gasoline price pyramid, has lately been just below the national average of $3.85 a gallon, a near unheard-of situation. It’s partly about the wholesale-level gouging in other states following Hurricane Ike. But there’s more to the story, says OilWatchdog’s friend, Insider. He figures the West Coast could get an even steeper drop in the next few weeks:
"The oil and refining companies have built up West Coast inventories due to the larger than expected decline in consumption. The stocks on hand are the summer (cleaner air) blend and the companies need to move it out for the winter blend. Combined with a decline in crude costs for non-crude-producing refiners like Tesoro and Valero, we’re ripe to see pump prices fall like a rock over the next 2 weeks. In the Pacific Northwest today, the companies cut wholesale prices by 15 cents per gallon. The retail price should fall dramatically soon. How long that continues depends. If they start hauling our fuel around to the Gulf and Southeast, where prices have topped $4-5 per gallon following Ike, it’d stop the slide fairly quickly."
Of course, what we’ve seen so far is that gasoline prices have not kept up with the drop in crude oil prices, and it’s not just because of refinery shutdowns caused by the hurricane. Even before Ike, gasoline was falling at only about half the rate of crude oil. That’s because refineries see a profit opportunity in slowing the price drop of gasoline. It’s another good reason for government to treat gasoline supplies as a national economic security issue by demanding a basic level of supply on hand to cushion prices.
If the rest of the country had the unusual extra supplies of the West Coast, the Ike gougers would have been out of luck.