Why California’s gas prices are going haywire

Gasoline at the pump in California is typically about 40 to 50 cents more expensive than it is anywhere else in the country. The state’s gas taxes are significantly higher than the national average and many of its retailers have to sell a higher-quality blend of gasoline in order to reduce smog and other pollutants. That all raises prices.

But over the past week, things have really gotten out of whack. California’s gas prices have leaped an additional 50 cents to near-record highs, causing mass grumbling, a political headache for Governor Jerry Brown — and even inspiring car thieves to start siphoning off gas from cars and trucks in rental lots. Here’s the chart o’ doom:

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So what happened? Why the chaos? As James Hamilton details over at Econbrowser, a handful of disruptions at key California refineries and a pipeline shutdown happened:
The Chevron refinery in Richmond (across the bay from San Francisco) has a normal capacity of 243,000 barrels per day, or 8.5% of the total petroleum products supplied to Petroleum Administration for Defense District 5, of which California is a part. But a fire at the Richmond refinery in August has significantly reduced its production.

The Kettleman-Los Medanos pipeline, which carries 85,000 barrels per day of crude oil to the San Francisco Bay Area, has been closed since mid-September due to organic chloride contamination. And on Monday, a power outage shut down ExxonMobil’s 149,000-barrel-per-day Torrance refinery in L.A.

Two factors allow the price in California to spike much higher than the rest of the country. First, a different blend is required to meet California air quality standards. Second, there is little pipeline capacity to bring in refined product from elsewhere.

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Continue reading:
http://www.washingtonpost.com/blogs/ezra-klein/wp/2012/10/08/why-gasoline-prices-are-going-haywire-in-california/?hpid=z5