California gasoline drought as resources shipped elsewhere

BAY AREA (KTVU) - On Wednesday Bay Area regular gasoline averaged $3.56 a gallon, which is 14 cents higher than a week ago.

Prices in Los Angeles have skyrocketed 78 cents since then and now stand at $4.28 a gallon. Meanwhile, those completely out of control southern California gas prices now threaten the Bay Area.

California's 15 refineries have the capacity to keep us in our special clean air gasoline formula. But, many like to export gasoline as well, and that can affect California's supply.

On Tuesday, we observed the petroleum products tanker Nord Imagination move, high in the water, apparently empty, from its anchorage near AT&T ballpark to the ConocoPhillips Refinery in Rodeo where it sat Wednesday, apparently loading refined product bound for Chile.

KTVU called the refinery to see if it was exporting gasoline, currently in short supply in California, to South America. The refinery did not respond.

Severin Borenstein is a renowned economist at the UC Energy Institute at Haas School of Business. "One of the things that crude oil companies and gasoline refiners do, is they're constantly watching the price in different locations and they will change the destination of a tanker if the price differential warrants it," says Professor Borenstein.

California refiners argue that crude oil supplies are tight and that refining capacity is tight.  In fact, California gas inventories are at an all-time low which causes our prices to spike. "And yet, the refiners are shipping to South America, to Chile to Central America," says Jamie Court of Consumer Watchdog, a fierce critic of oil refiners.

In Chile, a gallon of gasoline or diesel sells for about $4.75 a gallon, higher than even California prices.

Presumably, those exports further reduce what's available for California consumers driving prices even higher. "This is one more tactic the oil refineries are using in order to artificially drive up prices and drive up their profits," says Consumer Watchdog's Court.

"We have a greater price spike right now than we have seen in many, many years in California. So, this is really an unprecedented price spike and I think it really does call for more investigation," adds Professor Borenstein of UC's Energy Institute at Haas.

Back to the 13 million gallon Nord Imagination moored at ConocoPhillips soon to sail to Chile. "What we're seeing is fuel being dumped out of a market that needs it and prices staying artificially high." says Court.

The oil industry says nothing illegal is going. This is how, it says, a fuel market operates.

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