Explaining Southern California's economy

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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Los Angeles gas prices are stable but still high

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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

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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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