Business & Real Estate

Remember $4-a-gallon gas? Get ready to say ‘ouch’

See how much California’s gas tax will rise through 2020

Increases to California's gas tax were approved in 2017 and will continue for years.
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Increases to California's gas tax were approved in 2017 and will continue for years.

Remember $4-a-gallon gasoline? It could be coming to a gas station near you, perhaps as soon as Memorial Day weekend.

At the close of January, national gas price tracker GasBuddy.com said average gasoline prices across most of California were at their highest levels in more than 850 days.

The rundown included $3.30 a gallon statewide, $3.43 in Los Angeles, $3.34 in San Francisco, $3.23 in San Jose, $3.38 in San Diego and $3.09 in Sacramento. On average, the price of gas at jurisdictions statewide spiked nearly 20 cents a gallon last month.

Prices were still climbing last week. On Super Bowl Sunday, GasBuddy said the average retail price of gas in Sacramento was $3.15, up 8 cents in one week. By comparison, the average price of gas nationwide that same day was $2.60 a gallon, up only 2 cents in a week’s time. Even so, that national average was up 34 cents year-over-year.

What’s going on?

“High oil prices continue to push gasoline prices to territory that Americans haven’t seen for years, aside from Hurricane Harvey last September,” said Patrick DeHaan, head of petroleum analysis for GasBuddy. “While oil production in the U.S. reaches highs not seen since the 1970s, OPEC’s production cuts for the last year have weighed heavily on global inventories, mitigating any small rise in U.S. production.”

Ominously, DeHaan warned that consumers are likely going to experience more financial pain at the pumps in coming weeks.

“…The damage could get even worse as refinery maintenance season and summer gasoline is on the horizon. This has been a storm brewing since the Obama administration legalized oil exports and OPEC (Organization of the Petroleum Exporting Countries) decided to forgo market share to tighten global supply. All of this and more will lead to average gas prices being 25-50 cents per gallon higher by Memorial Day…and flirt with $4 per gallon (in California).”

He said the Golden State has not seen $4-a-gallon gasoline since July 2014.

DeHaan explained that U.S. oil exports have steadily climbed for two years, but that outgoing oil has diminished excess domestic supplies, which puts upward pressure on crude oil prices. Although crude slipped lower last week along with stocks, it has been trading in the $65-a-barrel range. Back in September 2015, oil was hovering around $48 a barrel.

Even under ideal circumstances, Golden State gas prices are primed to rise. Prices traditionally begin their seasonal rise in mid-February as refiners begin maintenance that enables them to transition to producing more expensive summer-blend gasoline. If there are unexpected refinery disruptions, and if crude oil continues to swell in price, analysts say $4 a gallon is very likely throughout California.

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. Amid the cuts, he said there has been increased worldwide demand for oil, particularly in China. DeHaan added that U.S. oil inventories are down 77 million barrels from one year ago.

Rising gas prices have an impact on businesses throughout the Sacramento area – basically any enterprise that delivers or transports by motor vehicle, from pizza delivery to mobile pet groomers.

Jim Relles, owner of Relles Florist, a longtime fixture at 2400 J St. in midtown Sacramento, said the difference between $3 gas and $4 gas typically means about $1,000 a month to his business. His shop’s mobile fleet includes two delivery vans, each with a 50-gallon fuel tank, and three minivans.

“When it starts to creep above $3.25, that’s when we start to feel it,” Relles said.

Motorists filling up at Sacramento gas pumps last week said they, too, were feeling it.

“It really hurts to watch it go up again. I wanted (prices) to stay low for as long as possible, but I never thought it would last long,” said Sacramentan Greg Meade, filling up his sport-utility vehicle at the 76 station at X and 15th streets downtown, where the cash price was a comparatively reasonable $3.06 a gallon.

At the nearby Valero station at Riverside Boulevard and Broadway, the cash price of unleaded regular was $3.13. It was $3.29 at the Chevron station at 19th Street and Broadway.

“I hate it. I think it’s going to be $4 in no time,” said Jill Rivers, a Bakersfield mom visiting her daughter in Sacramento and filling a Dodge minivan at the Chevron station.

AAA said the all-time statewide high average price for unleaded regular was $4.67 a gallon on Oct. 9, 2012. That ceiling was reached during an extreme shortage of comparatively pricey summer-blend fuel, which prompted Gov. Jerry Brown to push for refineries to start making the cheaper, winter blend of gasoline for immediate release.

That fall 2012 crisis was prompted by a perfect storm of fires, problems and disruptions at California refineries. The state has its own regulations for producing specific blends of emissions-limiting gasoline, which means California cannot import gas on short notice if refineries suddenly stop producing.

Add on top of that California’s high fuel taxes and fees.

On Nov. 1, 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 Brown, who vigorously supported the measure to raise more than $52 billion over a decade to help pay for extensive road-improvement programs statewide. Public transit and other transportation programs likewise stand to benefit.

Mark Glover: 916-321-1184, @markhglover

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