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California gas prices see small drop

SUE MANNING, Associated Press
Wednesday, 10 Oct 2012 | 2:02 PM ET

LOS ANGELES -- California gas prices dipped slightly Wednesday after surging more than 40 cents a gallon in the past week.

However, an announcement by Chevron that the crude unit at its fire-damaged Northern California refinery would remain closed through the end of the year increased the likelihood that prices will stay high.

The average price of regular unleaded was just under $4.67 a gallon on Wednesday, down a half-cent from Tuesday but still the highest price in the nation, according to AAA's Daily Fuel Gauge Report.

The weeklong spike was the largest, single-state weekly increase since Hurricane Katrina, and the highest weekly increase in California history, AAA spokesman Avery Ash said.

The highest average price for regular in the state Wednesday was $4.75 in the San Luis Obispo, Atascadero and Paso Robles area. San Francisco's average price was just over $4.73 a gallon, followed by San Diego at $4.71 and the Los Angeles area at $4.70.

State officials predicted prices would fall after Gov. Jerry Brown ordered early production of a winter fuel blend to replace costlier summer blends.

Analysts said the spike in prices was driven by refinery disruptions, including an August fire at the Chevron plant in Richmond, a one-day power outage at a Southern California plant and corrosion problems in a critical pipeline.

Before the fire, the Richmond plant was producing 245,000 barrels of gasoline a day or 15 percent of California's gas demand, Ash said.

Chevron representatives didn't immediately return calls for comment.

Since the fire, the crude unit has been offline, but the plant has still been producing at about 60 percent capacity, analysts said.

Even though the main unit is out of commission, Chevron can buy products from other places to keep the refinery running, Ash explained.

Chevron's announcement on Tuesday that the fire would keep the crude unit closed through the fourth quarter "confirmed that refining capacity in California will remain tight through the end of the year," Ash said.

Many motorists and some lawmakers believe fraud might be more likely than a supply problem in California, so there have been calls for the Federal Trade Commission and the Department of Justice to investigate.

Brown moved to stop the spike by ordering the California Air Resources Board to allow "winter-blend" gasoline to be sold in the state earlier than usual to increase supply. To reduce air pollution, California law requires that gas stations during warmer months use a special blend of fuel.

California usually converts to winter gas on Oct. 31. The fuel evaporates in heat more quickly than summer-blends, so it sends more pollutants into the environment, especially in warm weather.

Air pollution regulators said they don't expect the state's air quality to suffer because of the early start, but the conversion could increase supply by 8 percent to 10 percent, the governor's office said.

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