California Gasoline Falls From Record as Refiners Switch

Gasoline at the pump in California fell from a record as refiners including Valero Energy Corp. and Phillips 66 began making a cheaper blend of fuel after receiving permission from the state.

Regular gasoline at the pump slid to $4.666 a gallon today from the all-time peak of $4.671 yesterday, according to data from AAA, the nation’s largest motoring organization. Prices jumped 50 cents last week as refineries reduced output and Chevron Corp. shut a pipeline because of contamination.

Gasoline inventories rose 4.9 percent last week, the California Energy Commission announced today.

“Street prices are leveling off,” Bob van der Valk, an independent petroleum industry analyst in Terry, Montana, said by phone today. “The good news is it’s not going to get to 5 bucks a gallon on average in California.”

Phillips 66 is producing gasoline with a higher vapor pressure at its California refineries, Rich Johnson, a Houston-based company spokesman, said today in an e-mail. Valero is also making the cheaper blend at its two plants in the state, Bill Day, a San Antonio-based spokesman for the company, said yesterday by e-mail.

Adding Butane

The California Air Resources Board granted refineries permission on Oct. 7 to make gasoline with a higher vapor pressure, allowing them to produce more of the fuel by adding butane to the mix.

“You can add more light gasoline blendstocks” and increase output by 2 percent to 5 percent under the rules, said Andy Lipow, president of Lipow Oil Associates LLC in Houston.

The recent price surge in California was the largest single-state weekly increase since Hurricane Ike in 2008 and the largest for California on record, according to Michael Green, a spokesman for AAA.

Wholesale gasoline plummeted. California-blend gasoline, or Carbob, on the spot market, declined 22.44 cents to $3.2993 a gallon in Los Angeles at 4:06 p.m. New York time, data compiled by Bloomberg show. The same 85.5-octane blend fell 22.44 cents to $3.2193 in San Francisco.

Retail prices began to skyrocket after Exxon Mobil Corp.’s 150,000-barrel-a-day refinery in Torrance, near Los Angeles, reduced production Oct. 1 after a power failure. That followed a fire that knocked out a crude-processing unit at Chevron’s plant in Richmond, near San Francisco, in August and the September shutdown of a Chevron pipeline that delivers crude to Northern California because of contamination.

Exxon’s plant resumed normal operations Oct. 5, Gesuina Paras, a Torrance-based spokeswoman for the refinery, said by e-mail. The refinery plans to flare gases through Oct. 31.

The Richmond crude unit won’t resume production in 2012, Chevron said in a third-quarter interim update late yesterday. The plant is producing transportation fuels at reduced rates.

Chevron’s Kettleman-Los Medanos oil pipeline remains closed.

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