Gas Prices Spike as Wholesale Supplies Dwindle

Many retailers are refusing to buy at high prices. Those who do are charging as much as $5.79 for a gallon of regular.

By Sharon Bernstein
|  Friday, Oct 5, 2012  |  Updated 7:08 AM PDT
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Southern California gas prices went up nine cents overnight to mark the biggest overnight hike this year. The dramatic increase happened as a result of the wholesale cost of fuel and panic-buying among gas station owners. Stephanie Elam reports from Marina Del Rey for the NBC4 News at 5 p.m. on Oct. 4, 2012.

Stephanie Elam, Kristopher Li

Southern California gas prices went up nine cents overnight to mark the biggest overnight hike this year. The dramatic increase happened as a result of the wholesale cost of fuel and panic-buying among gas station owners. Stephanie Elam reports from Marina Del Rey for the NBC4 News at 5 p.m. on Oct. 4, 2012.

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Gas Prices Skyrocket

Gas prices increased $.08 overnight, the highest single day price increase for gasoline in history. Some drivers in areas like Calabasas are paying close to $6 per gallon. Janet Kwak reports for the NBC4 News at 11 p.m. on Friday, Oct. 4, 2012.
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The price of a gallon of gasoline spiked as high as $5.79 in Southern California on Thursday, thanks to a dramatic increase in the wholesale cost of fuel and panic-buying among gas station owners.

Fuel was also harder to find at many locations, as some mom-and-pop retailers decided to sit out the price hikes and just shut down. Others looked for gasoline to sell, but couldn't find it.

"There was no gas to get for the last two days," said Tanya Barkhordar, whose family owns the Low-P gas station in Calabasas. For an awful 24-hours yesterday, the station's pumps were dry, Barkhordar said.

The family-owned operation got a load of gas on Thursday, but it was so costly that the station priced it at $5.69 for cash and $5.79 for credit, Barkhordar said.

Even at that price, she said, the station is only making 10 cents per gallon.

The average price of a gallon of regular rose nine cents overnight in Los Angeles County, to $4.35, according to the Automobile Club of Southern California.

At least three gas stations were selling the fuel for more than $5 per gallon.

Some motorists reacted to the spike by adjusting their plans. "I was going out to an event this weekend, but now I've decided to stay home," wrote Sheri Small in a comment on the NBCLA Facebook page. "We thought they were gouging us at $2 a gallon. Boy were we wrong!" 

Kathleen Sample commented: "Time to park the car and get a bike, tennis shoes. I mean, come on, this has to stop." 

Candace Rocha wasn't phased by the spike. "I haven't been to a gas station since July thanks to my Chevy Volt!" 

Many mom-and-pop stations have temporarily quit buying gas on the wholesale market because it’s become too expensive, said Jeffrey Spring, an analyst with the Auto Club.

A number of Costco locations are also not selling fuel, though the company has not said why.

Still, the pumps were flowing at a Burbank Costco, where lines of cars stacked up Thursday afternoon (pictured at right).

Spring downplayed the idea that there is an actual shortage of fuel in the area, saying that wholesalers still have unsold inventory that they could sell to gas station owners who want to buy it.

But, he said, a number of factors have caused prices to rise so high – and so fast – that some gas station owners are afraid to buy it. They worry that they will have to mark up the gas by as much as 50 cents per gallon – and fear that consumers will balk at paying that much, he said.

There are several reasons for the spike in prices at the wholesale market for gasoline. First, he said, wholesalers deliberately let their supplies of the special summer formulation of gas required by California state law for use in the warmer months, because they expected an influx of the less-expensive fuel used in the fall and winter.

But then, a power outage at a major refinery and fears of contamination in a Kern County pipeline drove supplies down further. To make matters worse, a Northern California refinery struck by fire earlier this year is still not back up to capacity, Spring said.

“Concerns in the wholesale market caused retailers to panic a couple of days ago,” he said.

Many purchased supplies quickly and pushed prices way up.

The impact at the pump was immediate: prices at the retail level rose 9 cents per gallon overnight last night, selling at an average of $4.35 per gallon today in Los Angeles County. By comparison, gasoline at this time last year was selling for $3.83 per gallon.

“It’s the biggest spike we’ve seen all year,” Spring said.

The Auto Club is expecting the price hikes to be “severe, but short-lived,” Spring said.

The organization has an online service that helps consumers find the least expensive gasoline in their area. Here is a link to that page.

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