Gas Prices Spike as Wholesale Supplies Dwindle

Many retailers are refusing to buy at high prices, causing the impression of a shortage, Auto Club says.

By Sharon Bernstein
|  Thursday, Oct 4, 2012  |  Updated 1:18 PM PDT
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Refinery Fire Drives up Gas Prices

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Refinery Fire Drives up Gas Prices

On Wednesday, spot market prices paid by independent gas station owners went up more than 4 dollars a gallon as a result of a refinery fire in the Bay Area.
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A dramatic spike in wholesale gasoline prices has made fuel harder to find at some Southern California locations.

Many mom-and-pop stations have temporarily quit buying gas on the wholesale market because it’s become too expensive, said Jeffrey Spring, an analyst with the Automobile Club of Southern California.

A number of Costco locations are also not selling fuel, though the company has not said why.

Spring downplayed the idea that there is an actual shortage of fuel in the area, saying that wholesalers still have unsold inventory that they could sell to gas station owners who want to buy it.

But, he said, a number of factors have caused prices to rise so high – and so fast – that some gas station owners are afraid to buy it. They worry that they will have to mark up the gas by as much as 50 cents per gallon – and fear that consumers will balk at paying that much, he said.

There are several reasons for the spike in prices a the wholesale market for gasoline. First, he said, wholesalers deliberately let their supplies of the special summer formulation of gas required by California state law for use in the warmer months, because they expected an influx of the less-expensive fuel used in the fall and winter.

But then, a power outage at a major refinery and fears of contamination in a Kern County pipeline drove supplies down further. To make matters worse, a Northern California refinery struck by fire earlier this year is still not back up to capacity, Spring said.

“Concerns in the wholesale market caused retailers to panic a couple of days ago,” he said.

Many purchased supplies quickly and pushed prices way up.

The impact at the pump was immediate: prices at the retail level rose 9 cents per gallon overnight last night.

“It’s the biggest spike we’ve seen all year,” Spring said.

The Auto Club is expecting the price hikes to be “severe, but short-lived,” Spring said.

The organization has an online service that helps consumers find the least expensive gasoline in their area. Here is a link to that page.

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