The verdict is in and it seems nearly unanimous. A series of refinery and pipeline mishaps, California’s isolation from the national pipeline grid, and its pollution restrictions have doomed the state to record-high pump prices.

Gasoline prices jumped nearly 20 cents a gallon on Thursday and are up nearly a buck over the past week. $5-a-gallon gas seems inevitable. Valero Energy Corp. said it has stopped selling fuel on the spot market because of the shortage and energy corporations are lining up with tales of woe about refinery and pipeline problems.

Yet, according to the California Energy Commission (CEC), output of California-specific gasoline—tailored to meet the state’s pollution standards—is just 2.5% lower than this time last year.

The Los Angeles Times cited the energy commission statistic, but didn’t elaborate on why the marginally lower supply is driving wholesale prices up so high that some retailers are electing to close their stations rather than sell the high-priced product. The commission did note that inventory at the state's refineries was 9% lower last week than it was at the same time last year.

Tom Kloza, chief oil analyst for the Oil Price Information Service in New Jersey, said problems among California’s pipelines and 14 refineries might not be the only reason for the price spike. “There is a sense out there that this might not just be the typical run of bad timing and bad luck in terms of refinery outages,” Kloza was quoted by the Los Angeles Times. “People are beginning to wonder whether something else might be involved.”

That “something else” might be fear. Jeffrey Spring, an analyst with the Auto Club, told NBC, “Concerns in the wholesale market caused retailers to panic a couple of days ago.” Many of them bought supplies quickly in anticipation of even higher prices to come and pushed prices way up, he said.

Still, there is no denying a hazardous confluence of recent events at the production level in the state. Chevron recently shut down its pipeline that ships crude from San Joaquin Valley to the Bay Area because of unexplained elevated levels of chloride in the oil; Phillips 66 announced its 120,000-barrel-a-day refinery in San Francisco was scaling back for maintenance; Exxon Mobil Corp curtailed production at its 149,500-a-barrel refinery in Torrance Monday after a power outage and is rationing supplies to buyers; and Chevron’s 245,000-a-barrel refinery hasn’t recovered from an August 6 fire. 

Fear and anticipation are not unknown pricing components in energy markets primarily driven by supply and demand. Neither are gouging and manipulation, although no one in the mainstream media is yet speculating along those lines. In California, that traditionally happens after the governor has been recalled.

–Ken Broder

To Learn More:

Gas Prices Suddenly Skyrocket in California (by Ronald D. White and Dalina Castellanos, Los Angeles Times)

California Gasoline Prices Soar Amid Supply Crunch (by Casandra Sweet, Wall Street Journal)

Gas Prices Spike as Wholesale Supplies Dwindle (by Sharon Bernstein, NBC Los Angeles)

Gas Prices Soar on Refinery, Pipeline Woes (by David R. Baker, San Francisco Chronicle)