While the low price of gasoline has many in the United States considering a return to fuel-hungry vehicles, the price actually has been rising in the country's car capital, California, for the past month.
The average pump price of gasoline soared by about 25 cents a gallon last week, from $2.98 for regular gas on Feb. 23 to $3.23 on Feb. 27. And the rise has been greater since Jan. 30, when refineries began shifting to a costlier premium fuel – mandated only in California and only to limit emissions in warmer months, according to Tom Robinson, the chief of Robinson Oil in South Bay.
On Feb. 26, some Southern California retailers, who had just paid premium wholesale prices for gasoline, passed that on to consumers as a price hike of 24 cents per gallon. The spike hit Northern California a day later, with service stations in the San Francisco area raising prices for regular gasoline by 20 cents a gallon to $3.19.
Driving prices even higher, fuel consumption is at its highest in the state in seven years because of the balmy weather in the West this winter, which has spurred increased outdoor activity for the season, including driving.
Add to that, an explosion Feb. 18 that stopped production at an ExxonMobil Corp. (NYSE:XOM) refinery in Torrance, Calif., and production can't resume until the state completes its investigation of the event. And the United Steelworkers strike against oil companies in the United States, now affecting 15 refineries, has closed the Tesoro facility in Martinez, Calif.
Making matters even worse is that because only California begins using a unique blend of summer gasoline, it can't conveniently and inexpensively buy it from neighboring states because they simply don't supply it.
"Your market in California has about as much margin for error as Jennifer Lopez's Academy Awards dress," Tom Kloza, global head of energy at the Oil Price Information Service, told The Associated Press. "If you're not a refiner who had a problem with a refinery this month – if you're not ExxonMobil – you have been rewarded with incredible profits this month. That's just the way the market works."
And while prices in the Rocky Mountain region remain around $2 per gallon, elsewhere in the United States the average price was up by 6 cents to $2.33 per gallon, as oil companies gradually prepare motorists for costlier gasoline during the nationwide summer driving season.
"The seasonal lift in gasoline prices remains well under way across the country, with the West Coast seeing the most excruciating rate of price increases," Patrick DeHaan, senior petroleum analyst with GasBuddy.com, told the San Diego Union-Tribune in an email.
Meanwhile, consumer groups are urging state regulators and lawmakers to watch oil companies closely to prevent price manipulation. For example, Consumer Watchdog based in Santa Monica has asked that state inspectors verify that refineries were shut down for the reasons cited by their operators. It estimates that two such shutdowns have cut California's refinery production by about 16 percent.
Whatever the inspectors find, it won't satisfy every customer. "The thieves are at it again," Errol Emrich of San Jose told the San Jose Mercury-News.
On Feb. 23, Emrich paid $2.89 a gallon at San Jose service station. It had some of the lowest prices in the South Bay region near San Francisco, but they're far higher than the $2.19 per gallon that he paid around Feb 1. "That's 70 cents in 23 days," he said.
By Andy Tully of Oilprice.com. Oilprice has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.