California is taking it on the chin this month for years of shortsighted anti-oil policies.
The state has been hit with massive, virtually overnight increases in prices at the pump, which seem to be rocketing toward $5 a gallon.
In Los Angeles, spot gas prices have soared $1 a gallon in the past week. Gas pump prices in the region rose by about 20 cents overnight Thursday. The average price is $4.315 at this writing, and prices above $5 were seen in parts of the San Fernando Valley.
The reasons given for the sudden spike are multiple. A power outage is being blamed for shutting down an Exxon refinery in Torrance, California, since Oct. 1. Exxon Mobil and Valero Energy are both rationing deliveries. Shortages are compounded by maintenance at two Phillips 66 refineries and Chevron’s shutdown of its crude oil pipeline to Northern California refineries last month.
Valero and Costco are shutting down pumps at their gas outlets due to shortages, and Exxon has begun rationing.
“I haven’t seen a series of incidents like this, and it has led to the worst panic-driven rise in gasoline prices that I have seen in 35 years,” Tom Kloza, chief oil analyst for the Oil Price Information Service, told the Los Angeles Times.
All the rationing and price hikes are having a ripple effect, making it difficult or impossible for independent stations to get their gasoline or make a profit. As a result, some independent stations are shutting down temporarily.
If the spike lasts, it’s going to increase consumer inflation all around and worsen the state’s jobs and budget crises.
California is one of those states that is virtually swimming in oil. It’s found throughout the state, including under farm lands, cities and beaches, as well as off the coast. But multiple agencies, such as the Coastal Commission, have effectively blocked much development of the state’s natural resources.
The bittersweet here is that the rising prices of crude oil have made many old oil fields economically viable again, and the state has been experiencing the beginnings of a drilling boom. But oil companies are having to negotiate a maze of regulations and make long lists of concessions to local governments to even have a chance to develop the oil fields.
It used to be a running joke in some newsrooms that when late spring came, it was time for the annual oil refinery fire. No doubt, some of this is pure market manipulation, but a lot of it has to do with things like state requirements to retool refineries every year for the winter mix of gas. With the general anti-oil attitudes in California, it doesn’t take much to send gas prices through the roof.
There’s also a political element here having to do with the coming election. President Obama is the most anti-oil president ever, and his administration has hit oil companies hard over the past four years. Putting the pinch right now, specifically on ultra-liberal California, a strong pro-Obama state, might be a high-level play to sway or at least dilute the vote.
Regardless of the real causes or motivations behind this spike, the state has made its own bed. Even if the current push to open up the state’s oil resources pays off in the future, right now it’s too little too late to make up for years of liberal anti-business philosophy.