Governor Jerry Brown on Sunday ordered California smog regulators to allow winter-blend gasoline to be sold in California this month, a move intended to reverse a sudden scare in the wholesale gasoline market that saw prices shoot up nearly 50 cents a gallon in six days.
In the Los Angeles market, the average price Sunday went up nearly 4 cents, to another record level: $4.696. On Saturday, the average price of a gallon of self-serve regular gasoline in Los Angeles County had risen to a record $4.661, increasing 12.2 cents from Friday.
The governor ordered the California Air Resources Board to allow refiners and gas stations to roll out the winter blend before its previously-scheduled Oct. 31 sales date, an action the governor said will increase gas supplies up to 8-10 percent "with only negligible air quality impacts."
In a letter released at noon, as California gas prices fluctuated widely for the seventh straight day, the governor said the market variations were imposing "unacceptable cost impacts on consumers and small businesses." This, he said, was threatening "significant economic disruption, and serious harm to public safety and welfare."
An analyst said California's wholesale gasoline market has gone "into a panic about the adequacy of California fuel supplies" Jeffrey Spring of the Automobile Club of Southern California said the market disruption followed a power failure at the ExxonMobil Torrance Refinery and closure of a Chevron pipeline that moves crude oil to Northern California last Monday.
Other pressure on the state's gas market includes local refineries dropping production levels, energy companies exporting fuel to Mexico and other countries, and allowing inventory to dwindle in anticipation of switching over to production of winter blend gasoline, Spring said.
"I am directing the Air Resources Board immediately to take whatever steps are necessary to allow for an early transition to winter-blend gasoline" to be sold in California, the governor said in a letter to Mary Nichols, his appointed head of the CARB.
Some clean air advocates had worried that such a move would hurt air quality in October, which is one of the hottest months in coastal California due to Santa Ana windstorms and other seasonal weather fluctuations.
The governor said today that winter gas evaporates more quickly than summer blend, which takes longer to evaporate and is better during the smoggiest months of the year in the summer.
Brown said he expected gas prices to settle down, now that the ExxonMobil refinery in Torrance has resumed operations following an electricity outage last week. A Tesoro refinery in the South Bay is expected to resume production next week, after its maintenance shutdown.
It's unclear which of the company's two South Bay refineries was shut down. Tesoro owns refineries in Wilmington and Carson.
In response to the Tesoro refinery's shutdown, on Sunday, Sen. Dianne Feinstein charged that California's record gasoline prices may be the "results of an illegal short squeeze" engineered by the handful of companies that refine gas in the state.
In a letter to the Federal Trade Commission, Feinstein, cited news reports that said Tesoro Corporation was taken advantage of by other gas suppliers "either through collusion or the use of market power."
"Publicly-available data appears to confirm that market fundamnetals are not to blame for rising gas prices in California," the California Democrat wrote in a letter to FTC chairman Jon Leibowitz.
Feinstein also called on the FTC to monitor energy price and production data gathered by other government agencies, to watch for "fraud, manipulation or other malicious trading practices."
She also urged the FTC to establish a permanent gas and oil oversight market committee, similar to the Federal Energy Regulatory Commission's oversight of the natural gas and electricity markets.
Feinstein said "California consumers are all-too-familiar with energy price spikes which cannot be explained by market fundamentals, and which turn out years later to have been the result of malicious and manipulative trading activity.
She reminded the FTC of past frauds, like the 2000-2001 electrical crisis, which turned out to have been caused by market manipulation by Enron and other traders. That fraud cost the state an estimated $40 billion, caused rolling blackouts, and is cited by some historians as having cost Gov. Gray Davis his political career.