California gas prices ebb at last after record run-up

Oct 10 (Reuters) - Record-high California retail gasolineprices began to ease on Wednesday, receding from nearly $5 agallon, even as further refinery disruptions threatened to slowthe decline.

The average price of a gallon of regular gasoline in thestate dipped by a half cent to $4.666, according to the AAA FuelGauge website, easing from the previous day's record. A dramaticspike 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 stillup more than 45 cents from just a week ago, and the premium thatCalifornia's motorists are paying versus the U.S. average isstill unusually wide at 85 cents.

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

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

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

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

The price spike eased after California Governor Jerry Brownon Sunday ordered that service stations be allowed to beginstocking "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, andanalysts said a sharp fall in retail prices would follow withinabout a week, barring further market disruptions.

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

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

Meanwhile, Chevron Corp said a key unit at itsRichmond, California, refinery, which suffered a major fire inAugust and also contributed to the supply squeeze, will remainshut through the end of the year - the long end of earlierestimates by industry sources. The company had not said how longit would be shut.

(Reporting by Jonathan Leff; Editing by Jeffrey Benkoe)

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