Posted in: Gas Prices,
by Patrick DeHaan on Oct 2, 2012 01:20 PM
As we surmised Monday, as temperatures seem to climb, so do gasoline prices. This is seemingly the case in California where a late season heat wave has spelled trouble for refineries as power problems have led to sudden drops in gasoline production, fueling fears of supply issues.
Wholesale gasoline prices, the price gas stations pay for their gasoline, surged yesterday and is continuing to mount an impressive rise today. If gains on the market so far today hold, wholesale prices may be as much as 73c/gal higher than they were a week ago today. Such a spike could lead to massive spikes over the next week in California as stations sell through their cheaper gasoline and begin to raise prices to offset the higher cost of replenishment.
So far today, California gasoline prices are up over 2c/gal on average, and will likely continue to climb throughout the day. While wholesale is up significantly in the last week, retail prices in California have only risen 12c/gal, meaning a rude awakening is set to occur over the next few days for motorists in the Golden State.
While the heat may subside over the next 48 hours, the damage to refineries because of power-related issues may linger, so motorists should expect the gas price spike to last a week or perhaps longer as issues are sorted out, and production again increases.
California gasoline prices may surge in the next five days, perhaps to levels higher than February's $4.33/gal average. It is within the realm of possibility that average prices reach near $4.40/gal or even higher if the situation worsens.
Motorists are urged not to make the situation worse by filling completely, and only buying what they need for the short term. Straining supply by filling up at lower prices may exasperate the problem further.