Explaining Southern California's economy

Los Angeles gas prices are stable but still high

August-20-Gas-Prices

EIA

Gas: It's more expensive everywhere in the U.S. But it's especially expensive in California.

The fire at Chevron's Richmond refinery in the Bay Area several weeks ago caused gas prices in the Southland to shoot above $4 a gallon on average. And there they have stayed. According to GasBuddy.com, a gallon of regular currently costs Angelenos about $4.11. That's where the average, more or less, has been for a week.

The U.S. Energy Information Administration released its weekly survey of gas prices nationally, and it shows that L.A. drivers shouldn't be shocked at the $4-plus pricing. The entire West Coast region (there are five regions in the U.S.) hit $4 on August 20, with California accounting for a notable 22 cents of that average. Take California out of the picture and West is paying $3.78 on average for a gallon of regular.

The West Coast region has seen by the largest year-over-year increase in the price of gas: 31 cents.

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No Chevron fire and gas prices probably would have stayed lower

July-CPI-Grab

BLS

According to the Labor Department, gas prices have been going down since April. They moved up very slightly in July, nationwide. But they've move up a lot more in Southern California.

The Labor Department released its July Consumer Price Index this morning. This is an important monthly government dataset because it helps everyone who needs to make decisions about the U.S. economy to get a fix on inflation. There hasn't been much inflation in the U.S. over the past few years, and that's driving pressure on the Federal Reserve to undertake another round of monetary stimulus. (Why worry about pumping potentially inflation-producing money into the economy if there inflation hasn't shown up when money has been pumped into the economy before?)

The July CPI was basically flat. In Los Angeles, however, we're keeping a close eye on gas prices, after the Richmond refinery disaster. Prices have spiked since last week, but at the moment they've leveled off. The average gallon of regular in L.A. is selling for $4.10, according to GasBuddy.com.

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Southland gas prices: Are emotions cooling?

ARCO-397-MDB

Matt DeBord/KPCC

$3.97 a gallon north of Pasadena, CA early this week. Oh, those were the days! The average price in L.A. is now $4.10. But the climb has leveled off.

Yesterday, I talked to Patrick DeHann of GasBuddy.com about gas prices in the Los Angeles area. During the course of our conversation, he predicted that upward pressure on gas prices in the region, in the wake of the Chevron Richmond refinery fire, would ease. 

"Wholesale prices have already come down a bit as emotions have cooled off," he said.

Translation: Some of the uptick in prices we saw last week was based on fear, plain and simple. Now the market has figured out that it can still resupply itself, and that's caused prices to level off, at least for now.

Prices in the Southland still haven't cracked $5 — the most expensive gallon of regular gas remains $4.99. Will that barrier — which is emotionally important for consumers — be crossed in the coming days? We'll see.

Previously:

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Map: Search for gas prices in L.A. Why do they vary so much?

Los Angeles Gas Prices provided by GasBuddy.com
Click here to add this map to your website.

According to GasBuddy.com, the average price for a gallon of regular gas in Los Angeles is now up to $4.10, an increase of about a penny since yesterday. But in the area, you can buy a gallon of 87 octane for as little as $3.78 — or as much as (almost) $5.

Why so much price variation?

I called Patrick DeHann, a senior petroleum analyst at GasBuddy.com, for some insight. He gave me plenty.

The disruptive event is obviously the Chevron Richmond refinery fire, which took out some portion of roughly 15 percent of the specially forumulated, cleaner-burning fuel that California law requires (DeHann pointed out — and this is backed up by some of the reporting I've seen — that Richmond isn't completely offline). But what's really causing price volatility is the wholesale market. That is, the place where gas stations — retailers — go to buy their gas.

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Why is BP selling its refinery in Carson, California?

ARCO-397-MDB

Matt DeBord/KPCC

These stations belong to Texas-based Tesoro now. BP is selling the Arco brand, along with a big refinery in California

As the L.A. Times rightly points out, the fire at Chevron's Richmond refinery in Northern California — and the ensuing spike in gas prices — has overshadowed a deal between BP and Tesoro of take over a big BP refinery in Carson:

During any other week this year, the biggest energy news in California would have probably been the long-awaited announcement of a buyer for BP's 266,000-barrel-a-day refinery in Carson, which is the state's largest such facility.

First, the deal will make San Antonio-based Tesoro Corp. California's biggest and most important refiner of motor fuels. Tesoro already owns the state's fourth-largest refinery, the 166,000-barrel-a-day Golden Eagle (Avon/Rodeo) facility and a 97,000-barrel-a-day refinery in Wilmington.

The BP deal will push it ahead of Chevron, which has two refineries that produce about 503,000 barrels a day. Tesoro will have 528,000 barrels a day of capacity.

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