California gas prices are going up. But prices are falling across the US. What’s going on?
Gasoline prices are falling fast around the country — but in California, prices are going up. And they’re likely to go up even more.
That’s the prediction from experts, who see the state facing a unique set of challenges.
“We’re going to see more notable increases” over the next week or two, said Patrick De Haan, head of petroleum analysis at GasBuddy, which tracks gasoline prices.
He predicted increases during that period of 35 cents to 50 cents a gallon in Northern California.
Nationally, the average price of a gallon of gasoline Monday was $3.71, down from $3.78 a week ago and far from the June peak of $5.01.
In California, the average price on Monday was $5.40. While that’s well below the June peak of $6.43, it’s up from $5.26 a week ago, $5.39 on Sunday and $4.39 a year ago.
The reasons for the higher prices are both cyclical and structural.
De Haan pointed to refinery outages that appear to have reduced the amount of gasoline that refineries supplying the state can produce. While the precise reasons for the interruptions are unclear, they could include factors such as computer trouble or an internal part not working.
The extreme heat in parts of the state recently could also be a factor, said Sanjay Varshney, professor of finance at California State University, Sacramento.
Then there’s the ongoing factor of geography. In many states, it’s easier to compensate for refinery problems. Oil from the Gulf can more easily flow to states in the East and Midwest. That’s more difficult to do for California.
“California refineries need to run at near full capacity to meet the state’s gasoline demand,” the federal Energy Department wrote in an analysis this year.
It said if a refinery has operating issues, supplies from other sources may not come quickly.
“Even when supplies are available from other West Coast refineries, U.S. Gulf Coast refineries, or from foreign refineries, they can take a relatively long time to arrive in California,” it said.
Why won’t gasoline prices drop?
California faces other ongoing challenges that have historically made gasoline more expensive.
The taxes motorists in the state pay at the pump are the highest in the nation and the state’s environmental laws are among the country’s toughest.
“California gasoline prices are generally higher and more variable than prices in other states because relatively few supply sources offer California’s unique blend of gasoline outside of the state,” the federal Energy Department wrote in its analysis of California gasoline prices.
“California’s reformulated gasoline program is more stringent than the federal government’s program. In addition to the higher cost of this cleaner fuel, state taxes on gasoline in California are higher than they are in most states,” it said.
There is some possible good news. Varshney saw prices dropping by the end of the year.
As oil prices increased this year, producers were more motivated to produce more. That means more supply. Combined with less demand, as inflation chilled consumer demand and the economy slowed, prices should come down, he said.
And, Varshey predicted, “Demand is going to cool off.”
This story was originally published September 12, 2022 at 12:08 PM.
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