Explaining Southern California's economy

No Chevron fire and gas prices probably would have stayed lower



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.


Southland gas prices: Are emotions cooling?


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.



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

Los Angeles Gas Prices provided by GasBuddy.com
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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.


Los Angeles gas price watch: $5 a gallon?


Matt DeBord/KPCC

DeBord Report always hits this station for affordable gas. It's currently about 12 cents below the L.A. average, but climbing.

The cheapest price for a gallon of regular gas in L.A. is now $3.85, according to GasBuddy.com. As you might expect, the reliably inexpensive Costco is second-cheapest, at $3.87.

The average price in L.A. is still north of $4 a gallon — $4.09 in fact — and moving up very slightly, in the aftermath of the Chevron Richmond refinery fire that took out 15 percent of fuel production in California. Prices have surged in the past week.

But what about $5 a gallon? There can be a big difference in the L.A. area between the cheapest price, the average, and what stations in certain areas are charging. 

For example, a Shell station in downtown L.A. [Actually, it's not in downtown L.A. — I was confusing it with a station that is and where I've bought some pricey gas on a few occasions] always seem to be selling gas that's much more expensive than the average (it's currently $4.93). But the real envelope-pusher is a Mobil station in West Covina, with a gallon of regular currently retailing for just one penny less than $5.


After the Chevron refinery fire, Gas prices in Los Angeles are rising fast

California Gas Prices Fall 9.6 Cents In One Week

Justin Sullivan/Getty Images

These prices are from earlier this year. Prices has been falling, but hey're back up to these levels in Los Angeles.

It’s been about a week since a fire shut down one of Chevron’s two refineries in California. Now gas prices in Southern California are starting to climb and climb fast. So if you need to fill up your tank you’re going to be emptying a little more of your wallet. The average price of a gallon of regular gas has jumped more than 20 cents since last week, according to GasBuddy.com.

That's $3.88 to $4.09 — in less than seven days! Note that this is much higher than the national average of $3.68 per gallon.

The dreaded $4-a-gallon threshold has been breached in Los Angeles. Blame the fire at Chevron’s Richmond refinery in the Bay Area, where 15 percent of the gas that keeps California moving is produced.

The big jump in prices hasn’t surprised anyone. Analysts who follow the oil and gas markets predicted last week that prices for California’s special blend of cleaner-burning fuel would spike. But if four bucks a gallon sounds bad, how does…five bucks strike you? At several stations in Los Angeles, that’s just about where prices are right now. Chevron hasn’t yet started to repair the Richmond refinery, so expect high Southland gas prices to stay elevated for at least the next few weeks.