Gasoline costs have surged dramatically in California, far outpacing the national trend, leaving drivers grappling with record-high prices.
According to AAA data, California’s average gas price soared by $0.23 per gallon in just one week, hitting $5.27 per gallon on Friday, while the national average stood at $3.54 per gallon, marking a $0.04 increase during the same period.
Tom Kloza, global head of energy analysis at OPIS, attributes California’s price surge to refinery issues, notably the shutdown of a crucial Phillips 66 refinery in the Bay Area, opting for renewable diesel production.
“Combine this with planned maintenance at two key refineries in May and the usual speculative trading in global markets in the second quarter, and wholesale prices have skyrocketed,” Kloza said.
Kloza estimates that gasoline in San Francisco, excluding taxes and other expenses, is selling at nearly $60 per barrel higher than current crude oil levels.
While West Texas Intermediate (WTI) futures surpassed $86 per barrel and Brent settled above $91 per barrel, Kloza anticipates a correction in gasoline and crude oil prices within the next month.
Last year, California enacted the Gas Price Gouging and Transparency Law to regulate refinery profits, with regulators set to finalize specific rules next week.
Andy Lipow, president of Lipow Oil Associates, warned that the law’s requirements might discourage gasoline importers, exacerbating supply shortages when outside supplies are crucial.
California’s gasoline typically costs more due to stringent blend requirements and high taxes aimed at carbon emission reduction initiatives.
Despite falling gasoline inventories across the US indicating strong demand, Regina Mayor, KPMG global head of clients and markets, predicts continued demand growth during the summer driving season, driving prices up. However, Mayor foresees demand decline if prices become unacceptably high.
