California gas prices finally end run-up

October 10, 2012: 4:29 PM ET
gas prices october
The average gas price declined in California Wednesday after 11 straight days of increases.
NEW YORK (CNNMoney)

Gas prices may have finally topped out in California.

The average price of a gallon of regular edged a half-cent lower Wednesday, according to a reading from AAA. That ended a streak of 11 days of increases that lifted prices more than 50 cents a gallon to record highs.

Wednesday's statewide average of $4.666 has now been essentially unchanged since Monday when rounded to the nearest penny.

Even if prices turn higher again in the days ahead, experts believe more substantial declines are likely.

On Sunday, California environmental regulators, acting on a request from Gov. Jerry Brown, agreed to allow refineries to start making a cheaper winter blend of gasoline as soon as possible -- a move that could solve shortages of the more expensive summer blend that sparked the price spike.

Normally, refineries wouldn't start making the winter blend until the end of October.

Most of the country makes the transition from the cleaner summer blends of gasoline to the cheaper winter blends on Sept. 15. California, with warmer average temperatures and the nation's strictest air pollution rules, usually makes the transition six weeks later.

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The cleaner gasoline is used in the summer to mitigate against the smog that accompanies warmer temperatures.

The switchover can often cause shortages of the summer blend and a temporary rise in prices. Refineries and stations don't want to have an inventory of the more expensive gas when it is time to start selling the cheaper gas.

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Refining capacity is also an issue. Tom Kloza, chief analyst at the Oil Price Information Service, which compiles prices for AAA, said a major refinery in Richmond, Calif., owned by Chevron (CVX), still hasn't returned to operation since an August fire.

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More recently, California refineries owned by Tesoro (TSO) and Exxon Mobil (XOM) were also off line for maintenance, although the Exxon refinery came back Friday, while Gov. Brown said the Tesoro refinery is due back in operation this week.

Kloza said the wholesale prices have already started to fall..

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"I don't want to say the coast is clear but there is a light at the end of the tunnel," Kloza said. He said even if prices in the state do edge higher, he thinks they won't get above $4.75 a gallon.

The spike in California comes while gas and oil prices have remained relatively stable in the rest of the country. The national average for a gallon of regular gas has kept to a narrow range of between $3.78 and $3.82 during the last week.

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