Why are gas prices rising so fast this spring?
Four-dollars-a-gallon gasoline, not seen in the Golden State since midsummer 2014, is starting to look likely due to developments that pushed at-the-pump prices into overdrive last week.
February predictions of $4-a-gallon gasoline in California by Memorial Day stalled a bit in March, but prices are climbing again, and not just in California. Nationwide, energy experts are forecasting gasoline prices to stay pegged at their highest levels since 2015.
On Monday, national gas price tracker GasBuddy.com put the average retail price of gas in California at $3.54 a gallon, up 17 cents from a month ago and a nearly 54-cent increase over last year. In Sacramento, the average was $3.42 a gallon, a 16-cent spike in one month and almost 52 cents higher than this time last year. In San Francisco, gas was going for an average of $3.65.
The nationwide average was $2.71 a gallon, up 18 cents from last month.
This comes on the heels of recent weeks of flat prices or slow cost increases, when crude oil prices were hit by some steep dips in stock markets and concerns about a tariff battle between the United States and China.
As recently as April 9, GasBuddy senior petroleum analyst Patrick DeHaan said: “As markets have seen concern rise of a possible trade war between the U.S. and China, oil prices have been hit hard, leading gas prices to dramatically slow their recent ascent.”
So what happened last week to change things? It could be boiled down to one word: Syria.
President Donald Trump’s midweek tweet that missiles “will be coming” to Syria in retaliation for a chemical weapons attack in that nation was enough propel crude oil prices above $67 a barrel, a nearly four-year high, before Friday’s actual airstrikes. Analysts said it was indicative of oil markets’ volatility in connection with any real or threatened upheaval in the Middle East.
For perspective, crude oil was hovering around $48 a barrel back in September 2015.
However, DeHaan said Syria is just one factor putting upward pressure on prices.
“Ultimately, (the Organization of the Petroleum Exporting Countries) bears much of the responsibility for cutting oil production in 2017, leaving U.S. oil inventories at far lower levels than a year ago. However, higher oil prices have also enticed U.S. producers to ramp up crude oil exports, effectively draining U.S. oil inventories at a higher pace than that oil is being replaced,” he said.
DeHaan said that OPEC’s production cuts have removed more than 500 million barrels – about 1.8 million per day – of supply since they were enacted at the start of 2017.
Even under ideal circumstances, Golden State gas prices were primed to rise. Prices traditionally start their seasonal rise in mid-February as refiners begin maintenance that enables them to transition to producing more expensive summer-blend gasoline. And California’s relatively healthy economy has prompted Golden State residents to hit the road well before the traditional summer driving season.
“Demand for gasoline this March was very strong, closer to the demand AAA typically sees during the summer,” Michael Blasky, AAA Northern California, said earlier this month. “If demand stays strong, the price of fuel is likely to keep rising.”
California’s high fuel taxes and fees have likewise played a role.
Last November, a 12-cent increase in the base gasoline excise tax went into effect statewide, pushing the base from 18 cents a gallon to 30 cents. That was a byproduct of Senate Bill 1 signed into law earlier in 2017 by Gov. Jerry Brown, who vigorously supported the measure to raise more than $52 billion over a decade to help pay for extensive road-improvement programs statewide.
DeHaan offered a mixed assessment of the near future: “The seasonal surge at gas pumps is in full motion, causing the most dreaded time of year for fearful motorists, especially of what may still be coming. With the national average gas price now at its highest since July 26, 2015, I can’t immediately allay all fears of a continued spike in gas prices. However, we’re likely in the closing innings of the seasonal rise. Let’s just hope we don’t go to extra innings.
“In the past few years, the average date that gas prices have peaked is mid-May, which is just around the corner, and by all metrics, that could be very close to what we expect this time around.”