Posted: Oct 8, 2012 6:29 PM by Cameron Polom, KSBY News
U.S. Senator Dianne Feinstein has called for a federal investigation into gas prices in California because she doesn't think they are related to supply and demand.
Governor Jerry Brown over the weekend ordered state smog regulators to allow winter-blend gas to be sold three weeks early in our state.
However there are a number of factors that go into spiking these prices, from wall street speculation to refinery fires like we saw in Richmond.
"It takes me about one hundred and thirty bucks to fill this thing," says one local resident.
"Fifty nine dollars and forty three cents and I'm guessing I got half a tank," said another resident.
In less than a week, gas prices in both San Luis Obispo County and Santa Barbara County jumped almost fifty cents.
"It's going to hurt everyone around here," said one resident while filling up.
The US Energy Information Administration says as of April 2012, crude oil prices made up 66 percent of the price of gas.
The rest of the pump price depends on refinery and distribution costs, corporate profits and federal taxes. Here in California we also have the added cost of seasonal blending.
And Governor Brown hopes going to winter blend now will bring down those prices.
"It wont have any immediate affect on prices," says Ken Dewar, a San Luis Obispo gasoline wholesaler.
Ken Dewar is a commercial gasoline wholesaler in San Luis Obispo and he says blending is only a small factor in the price of gas.
"It's the perfect storm, we would normally be going from summer grade gasoline to winter grade," says Dewar.
During the changeover period, refineries have less supply of either blend. But Dewar says oil speculation in the stock market has an even bigger impact on prices.
"A lot of speculation in the market of how long we're going to be at these prices, the market is full of speculators who buy and sell on a daily basis," says Dewar.
Prices of oil futures change daily, depending on what investors think the price will be in the months and years ahead.
Large wall street firms can invest billions of dollars a day in the futures market, shifting gas prices significantly.
If oil traders think demand will increase because the global economy is growing, they will drive up the price of oil.
And all this can create high oil prices, even when there is plenty of supply to go around.
Again, the blending process required here in California is a state mandate.
It makes for cleaner burning fuel but also increases the cost at the pump.
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