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California gas prices ebb at last after record run-up

Wednesday, 10 Oct 2012 | 7:30 AM ET

Oct 10 (Reuters) - Record-high California retail gasoline prices began to ease on Wednesday, receding from nearly $5 a gallon, even as further refinery disruptions threatened to slow the decline.

The average price of a gallon of regular gasoline in the state dipped by a half cent to $4.666, according to the AAA Fuel Gauge website, easing from the previous day's record. A dramatic spike in prices began just over a week ago.

While wholesale market prices had begun falling last Friday, it took some time for retail rates to follow. Prices are still up more than 45 cents from just a week ago, and the premium that California's motorists are paying versus the U.S. average is still unusually wide at 85 cents.

In Los Angeles, where shortages had been so acute that a handful of service stations were forced to stop selling fuel, average prices remained above $4.90 a gallon, among the highest in the state, according to the AAA data. Prices had topped $5 a gallon at many gas stations.

Retail prices surged by more than 50 cents a gallon last week and wholesale premiums rose by almost a dollar after a series of refinery mishaps pinched supplies.

Trading market sources said a possible "short squeeze" that came about when a big refiner was forced to buy fuel on the spot market may also have been a factor.

The jump in gasoline prices has unnerved drivers in car-loving California and led the state's two U.S. senators to call for a federal investigation of possible manipulation in the gasoline trading markets.

The price spike eased after California Governor Jerry Brown on Sunday ordered that service stations be allowed to begin stocking "winter-blend" fuel three weeks ahead of schedule, allowing refiners to start making the cheaper blend.

Wholesale prices dropped by 60 cents a gallon on Monday, and analysts said a sharp fall in retail prices would follow within about a week, barring further market disruptions.

But on Tuesday, wholesale prices in Los Angeles jumped by 26 cents a gallon after Exxon Mobil Corp said in a regulatory filing it would move ahead with planned work on its nearby Torrance refinery for the remainder of the October.

A power failure at the plant tightened supplies and contributed to last week's price surge.

Meanwhile, Chevron Corp said a key unit at its Richmond, California, refinery, which suffered a major fire in August and also contributed to the supply squeeze, will remain shut through the end of the year - the long end of earlier estimates by industry sources. The company had not said how long it would be shut.

(Reporting by Jonathan Leff; Editing by Jeffrey Benkoe)

((jonathan.leff@thomsonreuters.com)(+1 646 223 6068)(Reuters Messaging: jonathan.leff.thomsonreuters.com@reuters.net))

Keywords: CALIFORNIA GASOLINE/