Explaining Southern California's economy

Cost of Chevron's Richmond refinery fire: 118,000 barrels of oil a day

Tony Lee {fototaker}

Chevron's Richmond refinery near San Francisco was shut down due to fire. It affected the company's third-quarter earnings, but not substantially.

Chevron released its third quarter earnings on Friday, and they were weaker than the same quarter last year. The company made a mere $5.3 billion compared with $7.8 billion last year. 

“This quarter’s earnings were solid, but off from their near-record level of a year ago,” Chairman and CEO John Watson said in a release to accompany the earnings announcement. “Crude oil prices were down and we had a heavy period of planned oil field maintenance which temporarily reduced oil and gas production in several locations. Foreign currency movements also hurt our results this quarter, while they benefited the year-ago period.” 

People in this state might be curious about how California-based Chevron fared in the aftermath of the fire at its Richmond refinery in the Bay Area, which caused gas prices in the state to spike at the end of the summer (and contributed to something of a minor gas crisis in October when there were problems at several other refineries in the state).

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3 reasons LA is getting crushed by rising gasoline prices

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FREDERIC J. BROWN/AFP/Getty Images

A man pumps gas into his vehicle at a gas station in Monterey Park, Los Angeles County. Gas prices have dipped somewhat, but was the run-up due to market manipulations?

Los Angelenos have been suffering at the gas pump over the past week. Prices spiked by more than 50 cents, with the average cost of a gallon of regular zooming closer to $5 than $4. Following a fire at Chevron's Richmond refinery in August, L.A. drivers had already gotten used to a new normal, with gas stuck above $4. But last week, in some parts of the area, gas stations were posting prices closer to $6.

In response, Sen. Dianne Feinstein (D-CA) fired off her second letter to the Chairman of the Federal Trade Commission, insisting that the dramatic price increase couldn't be blamed on market forces — a basic imbalance of supply and demand — and was instead due to Tesoro, a major supplier of California's unique blend of gas, getting caught in a "short squeeze" that placed the company at the mercy of traders who were more than willing to use a 97-cent-per-gallon hike in the wholesale gas market to victimize consumers.

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FAQ: Why are gas prices so high in Los Angeles? Everything you need to know

Gasoline Prices

Ed Joyce / KPCC

Southern California gasoline prices skyrocketed Friday to $4.53 a gallon, nearing the all-time record price set in 2008. And there's no relief in sight.

In one short week, the price of a gallon of regular gasoline has shot through the roof, climbing nearly 50 cents. The price in Los Angeles County is currently at $4.59 on average, with prices in some parts of the city closing in on ... wait for it ...

Six bucks!

What's behind the big spike, which has now placed us within spitting distance of our all-time 2008 high of $4.61. 

Why? Why?!

Glad you asked...

Q: Does this have anything to do with the fire at Chevron's Richmond refinery from back in August?

A: YES! The oldest refinery in the state still isn't fully back online. It accounts for around 15 percent of all the gas that goes into motorists' tanks in the Golden State. And this isn't just any gas — it's a special formula, more environmentally benign, that is required by state law. Burning that fuel already costs Californians more than states where bad, old environmentally less clean gas is consumed. So any disruption in the supply is going to push our gas prices up — fast!

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Gas prices in Los Angeles remain above $4 a gallon

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Corey Bridwell/KPCC

Gas prices at a Chevron station in Pasadena, CA. In Los Angeles, prices has climbed well above $4 a gallon and are closing in on $4.20.

According the U.S. government, there's only one region in the U.S. where a gallon of regular gas costs more than $4 a gallon, and that's the West Coast (there are five regions altogether than the government has created to track). And within the West Coast, gas in Los Angeles is running 11 cents higher that the region as a whole, reports GasBuddy.com: $4.08 versus $4.19. 

Gas in California is always ore expensive than in the rest of the country. In fact, if you take California out of the West Coast region, the average price-per-gallon promptly falls 16 cents, to $3.92. At which point, the New England region then has the most expensive gas.

In L.A., our gas has been running above $4 a gallon since early-August, when the fire at Chevron's Richmond refinery took out one of the main suppliers of the special environmentally friendly formula that's required by law. 

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Unlucky ($4.)13 for gas prices in Los Angeles?

Marc Serota/Getty Images

People stand near downed branches as Tropical Storm Isaac begins to move ashore. The storm is creating havoc in the heart of the U.S. refining business, adding additional pressure to force prices up.

That's about the size of it. According to GasBuddy.com, the average price of a gallon of regular is holding steady at just about $4.13 today, a week ahead of Labor Day. 

This is about 2 cents higher than a week ago and confirmation that the fire at Chevron's Richmind refinery in the Bay Area a few weeks back has taken enough capacity offline to ensure that L.A. prices will remain above $4 a gallon.

But there are other problems in the world of gas refining and oil drilling. A fire hit a huge refinery in Venezuela over the weekend, and tropical storm Isaac is currently cutting a swath through the heart of the U.S. refining industry, the Gulf of Mexico. Numerous oil and gas suppliers and refiners have shut down their operations until the storm blows over.

All of this will push gas prices up nationally. They're risen about 25 cents since this time last month. But they haven't hit $4 yet. Los Angeles crossed that threshold a while ago because California law requires that our drivers burn a cleaner blend — one that isn't produced in significant volume outside the state.

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