Hurricane on the West Coast? Gas Price Volatility.
Hurricanes only happen on the East Coast or in Gulf states, right? Think again. A combination of refinery outages and tainted fuel in the pipeline caused a massive shortage of refined fuel in California this month that sent prices at the pump to their highest level in 5 years. The fluctuation was so swift, it reminds us of hurricane-like price instability.
While gasoline futures on the New York Mercantile Exchange (NYMEX) had fallen to a 10-week low, an entirely different story was unfolding in California that created turmoil among refiners, wholesalers, and convenience stores.
The Californian Problem
In Los Angeles, the spot price of gasoline surged over $1 a gallon in one week.In the Fall of 2012, we saw a drastic example of how prices can fluctuate due to supply shortages caused by weather, local government regulations, local disasters, and problems at the refineries and pipelines in spot (regional) markets, and how the price of gas can be drastically higher or lower in one area of the country as opposed to the national average. In Los Angeles, the spot price of gasoline surged over $1 a gallon in one week, while futures traded in the opposite direction on the NYMEX.