California nears record gas prices. What’s causing the spike and will costs stabilize?

Source: By Jacqueline Pinedo, Sacramento Bee • Posted: Tuesday, October 4, 2022

Gas prices could hit an all-time record high in California this week.

Prices have been surging upward, with no clear indication of when they will stabilize.

In one week, California saw a 58-cent per gallon hike on average for regular gas, ranking No. 1 in the nation’s top 10 largest weekly price increases, according to the American Automobile Association.

The state’s record gasoline price could be topped in the next three or four days, Patrick De Haan, head of petroleum analysis for GasBuddy, which tracks prices, said Monday.

The record is $6.43 on June 14. Monday’s prices for a gallon of regular averaged $6.38.

He said the increases could come in “small doses.” De Haan did see prices stabilizing and maybe even dropping by Thanksgiving.

A big reason for the disparity between California and much of the rest of the country is that at least six state refineries are undergoing maintenance, and moving supplies from the East to the state is difficult, according to AAA.

“This is really a regional thing and it really centers around maintenance,” said John Treanor, a AAA spokesman. “Globally the price of a barrel of oil is below 80 dollars a barrel, that’s lower than it’s been since January. So when you look at these things overall the recipe is out there for cheap gas, this really has to do with that maintenance.”

Treanor said planned maintenance and inspections are scheduled every few years at oil refineries after the summer months. However, this year those routine procedures overlapped unplanned maintenance at other refineries throughout the state. This has resulted in oil refineries being taken offline completely or working on limited supply.

Gov. Gavin Newsom requested “to take immediate action to increase the state’s gasoline supply” and have refineries use its winter-blend earlier this year in hopes to bring gas prices down for consumers.

The winter blend has already been released across the country, but according to Treanor, California is typically the last to release the blend in November.

Right now, “It is unknown how much of an impact this will have on prices,” according to AAA.

“I’d say some of these refinery issues could be pervasive. It could be a couple weeks before these issues are addressed,” DeHaan said.

The federal Energy Information Administration estimated that in August, about 57% of the price of gasoline reflected the price of crude oil. Another 15% involved marketing expenses and another 15% came from refining costs. An average of 13% was taxes.

California motorists pay taxes on gasoline that are among the nation’s highest. The state tax jumped to 53.9 cents a gallon in July.

In January, the American Petroleum Institute found that when the 18.4 cents a gallon federal tax and other taxes and fees are included, state drivers pay more for taxes at the pump than in any other state.

Another challenge lurks for prices. Officials from oil producing nations are scheduled to meet in Austria this week, and markets are anticipating big production cuts.