Oil prices are going down. The spot market price for gasoline is down. Your gas prices are going up.

Here's why:

Demand for gasoline in California has tanked every year for the last six years, yet prices continue to rise, even as oil prices drop. In 2008, for example, oil was selling for $147 a barrel, and California gasoline reached a record high of $4.62 a gallon. And last October, when gas prices in California surged to an average of $4.72 a gallon - the new record high - the same oil was selling for $89 a barrel.

San Diego gas prices increased 3.3¢ a gallon since Monday, matching the rate of increase we saw during the entire month of December in 2012.

We predict that gas prices could climb as much as 5.5¢ a gallon by Monday, despite reports of  healthy inventories of gasoline on the West Coast, and relatively stable oil prices.

On Monday morning, the market barely seemed to have a pulse. The three factors came into play:

On Thursday we predicted that gas prices would fall
another 8¢ by today (see last blog). 

Today, our look at wholesale prices shows that despite 
significant volatility on the wholesale level, gas prices will
continue to decline in Southern California. 

We predict that prices will drop on average by 4 to 10¢
a gallon by the time we make our next prediction on Thursday.

Gas prices have dropped 20 cents on average in the last week,
but the average basket of wholesale prices that we track have
dropped by 54¢ a gallon. So why aren't retail prices keeping
track?

The only thing preventing a price free-fall below $4 in the next
week or two are "sticky prices." This is the "Up like a rocket, down
like a feather" syndrome that Bill Lockyer referred to when he was
investigating gas prices as the Attorney General of the State of
California.

Late yesterday, UCAN, the Utility Consumers' Action Network, called on
California Attorney General Kamala Harris to investigate  the California
refineries that are responsible for the fuel shortages that have pushed
California's gasoline prices  to the highest level ever seen in U.S. history

The letter pinpoints eight areas that merit scrutiny by the Attorney General,
lawmakers, and regulators:

1)  Intentional under-production of fuel to restrict supply

2)  Overseas exports of gasoline - dumping fuel to restrict supply

Gas prices have climbed almost 60¢ in San Diego since Monday, and 40¢ since Thursday afternoon to a new all-time record high of $4.72 a gallon in San Diego. Governor Brown has ordered CARB, the California Air Resources Board to allow refineries to sell their inventories of winter blend gasoline, claiming that it will improve reserves of gasoline by as much as 10% and alleviate the alleged shortage of fuel in California (see LETTER to CARB here).

When Chevron's Richmond refinery caught fire at 6:45 PM, August 7, the flames and smoke spewed 4,000 feet into the air and sent hundreds of nearby residents to local hospitals with breathing disorders.  The price of surplus gasoline in California immediately skyrocketed, sparking fears of a "superspike" in retail gas prices.

What we saw was the beginning of a superspike. In the following eight days, gas prices screamed upward in San Diego at an average daily rate of 2.7¢ per day, moving from $3.86 a gallon on August 7, to the current average of $4.10 a gallon today.

Not only are traders losing their shorts, but local gas prices have plunged lower than the necklines at the Academy awards, dropping 7¢ a gallon since Thursday. In fact, with the exception of natural gas, the entire global petroleum complex is swan-diving toward lows not seen since June of 2010.

SAN DIEGO - Gas prices are expected to decline in the next few days in the wake of horrible economic news both internationally and locally in California.

Consider these facts:

Brent Crude - down ten cents a gallon in the last week and
poised to bellyflop below $100 a barrel (trading at $102 this AM).

NYMEX Crude - Plunged below the $90 mark earlier last week and
moved decisively into the high $80/bbl today at $87 this AM, down
ten cents a gallon since Monday.