Gas Prices

A cyclist rides by a sign at a gas station in Los Angeles posting the latest gas prices on Friday, Feb. 27, 2015. Gas prices in California soared overnight as a result of a combination of supply-and-demand factors worsened by the shutdown of two refineries that produce a combined 16 percent of the state’s gasoline. (AP Photo/Nick Ut)

By GILLIAN FLACCUS, Associated Press
LONG BEACH, Calif. — Feb 27, 2015 – 7:00 PM ET

Gas prices are soaring in California in a classic example of supply and demand after an explosion stopped gasoline production at an Exxon Mobil refinery while another remains offline due to labor unrest.

Average retail gas prices in the state have surged 25 cents a gallon in less than a week, from $2.98 per gallon for regular on Monday to $3.23 per gallon on Friday. That caps a run that saw the price of regular unleaded go up 60 cents per gallon since Jan. 30 as refineries prepare to shift to a summer blend of fuels.

In some areas of Southern California, gas station owners were forced to pass price hikes of 24 cents per gallon along to consumers on Thursday after seeing wholesale prices shoot up. Prices in Northern California lagged a day, but by Friday were also rising; an independent operator with a chain of gas stations around the San Francisco Bay area boosted prices 20 cents a gallon for regular on Friday, to $3.19.

The situation underscores the frustrating complexity of the gasoline market in California, where state environmental regulations mandate a specialized blend of fuel that isn’t used anywhere else in the U.S.

Because of that, California is economically isolated and can’t easily or quickly purchase fuel from outside the state in a crisis.

“Your market in California has about as much margin for error as Jennifer Lopez’s Academy Awards dress,” said Tom Kloza, global head of energy at the Oil Price Information Service.

“If you’re not a refiner who had a problem with a refinery this month — if you’re not Exxon Mobil — you have been rewarded with incredible profits this month. That’s just the way the market works.”

A unit of the Exxon Mobil refinery in Torrance that’s critical to producing California-grade gasoline exploded on Feb. 18, causing a fire and stopping new production there while the state investigates. The blast injured four contractors and rained a fine white ash on nearby homes and cars. State air quality regulators confirmed last week that the ash was not toxic.

At the time, another Tesoro oil refinery in Martinez, in Northern California, wasn’t producing oil due to labor unrest.

The two facilities combined make up 17 percent of the state’s crude oil processing capacity, said Gordon Schremp, a senior fuels specialist with the California Energy Commission.

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