Business & Real Estate

Long, downward slide in gas prices is ending, experts say

Lydia Holland fills up at a gas station in Sacramento. Rising wholesale gas costs are only part of the story in California. Prices will be impacted by factors that include refinery maintenance, ramped-up production of pricier spring/summer gasoline blends at refineries and perhaps even the United Steelworkers union strike, said Allison Mac, a GasBuddy analyst.
Lydia Holland fills up at a gas station in Sacramento. Rising wholesale gas costs are only part of the story in California. Prices will be impacted by factors that include refinery maintenance, ramped-up production of pricier spring/summer gasoline blends at refineries and perhaps even the United Steelworkers union strike, said Allison Mac, a GasBuddy analyst. The Associated Press

Energy experts on Monday had a sobering message for motorists who have been enjoying extraordinarily low gas prices throughout the fall and early winter: The party’s over.

“The four-month slide in gasoline prices has indeed come to a halt,” said Gregg Laskoski, senior petroleum analyst for GasBuddy.com, the national gas price tracker that does a daily survey of more than 700 gas outlets in the region, as well as nationwide.

Laskoski said a reduction in oil refinery output has been matched by sharp increases in wholesale gasoline prices, which will put upward pressure on gasoline prices across the country in coming weeks.

GasBuddy said the average retail price of gasoline in the Sacramento region fell just 1.3 cents over the past week to $2.33 a gallon, as of Sunday. That’s 20 cents lower than a month ago and nearly $1.10 below what area motorists were paying a year ago. Monday’s average rose a penny to $2.34, and GasBuddy said regional prices are projected to continue rising.

Nationwide, the average retail gas price increased 2.7 cents over the past week to $2.05 a gallon, still down $1.23 from last year and nearly 16 cents below the month-ago average.

In California, which typically has the highest gas prices in the contiguous 48 states, rising wholesale gas costs are only part of the story.

Allison Mac, another GasBuddy analyst, said California prices will be impacted by factors that include refinery maintenance, ramped-up production of pricier spring/summer gasoline blends at refineries and perhaps even the United Steelworkers union strike.

Nearly 4,000 workers went on strike Sunday at nine U.S. refineries, including Tesoro’s California facilities in Carson and Martinez. USW, which is calling for improved safety and health insurance, called for the strike after contract negotiations broke down with Shell Oil Co.

Historically, disruptions at California refineries result in higher gas prices within two weeks. “Labor strikes rarely result in refinery shutdowns,” said GasBuddy’s Mac, “but Tesoro is extending some maintenance at its (Martinez) refinery because of the strike.” She said the strike’s full impact on refinery production is as yet unknown.

“There’s so much going on here on the West Coast,” she said. “When all the refineries are working, we have more than we need. But things tend to go bad when there’s a big hiccup. We’re kind of crazy compared with the rest of the country.”

Mac said gas prices throughout California will likely continue going up through Memorial Day weekend.

But how fast and how much they will climb is difficult to predict.

Mac expects the biggest jumps will occur at California service stations that have been selling gas below $2 a gallon. “Those stations will see the most dramatic change. Those are the stations that are going to see 20 to 30 cents (price-per-gallon increases), probably over the next couple of weeks into mid-February.”

Historically, Mac said, gas price hikes between January and Memorial Day have been in the range of 55 cents to 65 cents a gallon. However, if the average retail price of gas in the Sacramento area rose 65 cents by Memorial Day, it would come in at $2.99 a gallon. That would still be $1.01 less than the average $4 a gallon that area motorists were paying over the Memorial Day weekend in 2014.

“It is a good bet that most drivers will pay more for gasoline in March than today,” said national AAA spokesman Avery Ash, in a statement issued Monday. “Yet even if gas prices increase as expected, drivers should continue paying at least a dollar less on gasoline than what they spent in recent years during the spring.”

Another factor in California prices is the potential impact of the state’s requirement, effective Jan. 1, that oil companies buy credits to offset the carbon emitted by cars and trucks. Hours after 2015 arrived, gasoline prices in Sacramento and throughout California inched upward after falling for weeks. Experts called the uptick a subdued response to the so-called “cap-and-trade effect.”

Prior to Jan. 1, opponents and supporters of the state’s effort to combat climate change offered wildly different predictions on how much gas prices would rise when the industry was included in California’s cap-and-trade market. State officials and some environmentalists insisted that it would be just a few cents a gallon; oil industry leaders raised fears of spikes as high as 75 cents or more a gallon.

On Jan. 2, the average retail price of gas in California was $2.64 a gallon, up 2 cents from New Year’s Day, according to GasBuddy. In Sacramento, the average was $2.54, also up 2 cents from Jan. 1.

But the cap-and-trade effect was quickly forgotten as gas prices statewide continued to fall throughout January, due to ample gas supplies and plunging crude oil prices.

Prices have fallen so dramatically that the state Air Resources Board says it’s difficult to determine the impact of cap-and-trade.

“I really can’t tell you that right now,” ARB spokesman Dave Clegern said Monday. “We were told by the industry that prices would go up a minimum of 10 cents and maybe more than that, but there really isn’t any consistency.” Clegern said gas supplies have been so plentiful “and so many factors go into pricing gasoline that we really don’t know what the impact is.”

The savings from low gas prices have been significant for businesses and consumers, here and nationwide.

In late November, Jim Relles, owner of Relles Florist in Sacramento, said he was saving up to $1,000 a month gassing up his fleet of delivery vehicles, compared to when gas was $4 a gallon. At the end of November, the average cost of unleaded regular in Sacramento was around $2.98 a gallon.

AAA spokesman Michael Green, writing on AAA.com in late October, said: “For every penny that the national (gas price) average falls ... more than $1 billion per year in additional consumer spending is estimated to be freed up.”

Energy analysts warn, however, that gas prices can unexpectedly spike at any time, due to unanticipated events, including production cutbacks in the Middle East, violent weather at key coastal refinery points or refinery fires. In the summer of 2012, for instance, fires at the Chevron refinery in Richmond and the Shell refinery in Martinez set off a gas price hike that saw the average price of unleaded regular in California soar to an all-time high of $4.67 a gallon in October that year.

Call The Bee’s Mark Glover, (916) 321-1184.

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