Gas prices are nuts: who’s to blame and what can we do about it?
by Andrew Alonzo | email@example.com
More often than not, Californians find themselves asking the familiar question while at the pump: why is gas so (insert expletive) expensive?
It’s a great question, and one that the California Energy Commission is attempting to answer. On Friday, September 30, the state commission sent a letter to five major petroleum companies seeking an explanation for the recent increases. As of Tuesday, it had not received a response.
Amid the surging prices, on September 30 Governor Gavin Newsom called for a windfall tax on oil companies, but since lawmakers don’t return to Sacramento until 2023, it’s unclear how much traction it will have. Such a move would raise taxes on oil companies’ windfall gains from events that drastically affect supply and demand such as war or natural disasters.
“While crude oil prices are down, oil companies have increased gas prices in California by a record 84 cents per gallon in just the last 10 days,” Newsom’s office wrote in a statement. “At the end of August, crude oil prices were roughly $100 per barrel, and the average gas price in California was $5.06; now, even though the price of oil has decreased to $85 per barrel, the average gas price at the pump has surged to $6.29. Meanwhile, oil companies have raked in unprecedented profits … nearly $100 billion in the last three months alone.”
It’s clear the governor’s office puts the blame on oil companies for setting exorbitant prices, but the state’s gas providers say the state’s stringent environmental fuel regulations — the most restrictive in the country — and taxes have caused the recent price spike.
Regardless of who is to blame, motorists, truckers, and other delivery outfits across the state are the ones feeling the pain at the pump.
In October 2021, the state’s average price per gallon bounced between $4.24 and $4.33, according to data from the United States Energy Information Administration. As of Monday, October 3, California’s average (all grades averaged together) peaked at $6.31. In contrast, the national average on Monday was just $3.90 per gallon.
Doug Shupe, Los Angeles Corporate communications manager for the Automobile Club of Southern California, said Californians typically pay the most for gas mainly due to the state’s various gas taxes as well as the cost of producing the special summer and winter blends utilized throughout the state.
“California is typically always within the top three states with the highest gas prices,” he said.
California not only tops AAA’s list, but also the EIA’s data. Nevada comes in second according to AAA at $5.51 per gallon as of Tuesday, October 4. Oregon has the third highest average, with residents paying around $5.46 per gallon.
On Monday, October 3, the average price of gasoline in Los Angeles County hit a record price of $6.47, according to AAA. About a week ago, Shupe said the average price sat around $5.84; a month earlier, $5.26.
So, what happened? According to Shupe, the steady rise in prices can be attributed to a string of issues at various state refineries.
“There’s about a half dozen that have experienced some type of either planned maintenance, or an unexpected, unplanned outage,” he said. “The combination of the outages has really reduced our fuel inventories. It’s not necessarily their fault, they have to do maintenance on refineries. Typically, they do maintenance during the spring, right before the busy summer driving season.”
Shupe noted that recent data from the EIA shows that, “West Coast fuel inventories are at their lowest level that we’ve seen in about a decade.”
In January 2010, West Coast refinery inventories of crude oil (excluding inventory from the federal Strategic Petroleum Reserve) were at a historic low, with about 45,042 barrels in stock. As of September 23, 2022, that figure was around 48,647, according to the EIA.
Looking at averages from counties across the state, Los Angeles’s $6.49 per gallon does not seem so bad when compared to Humboldt’s $6.87, or Sierra’s and Del Norte’s $6.74. Orange County has an average about four cents lower than Los Angeles. However, no one’s feeling the pain quite like Mono County up north, where the average floats at about $7.16.
To view the list of daily average prices from AAA, visit gasprices.aaa.com/?state=CA.
In order to combat the recent hikes, last Friday Governor Newsom called for the California Air Resources Board to assess if the state could make the transition to the winter blend of gasoline earlier than the beginning of November.
The butane-based winter blend is 15 to 20 cents cheaper per gallon to manufacture than the summer blend. No word yet on when the blend — and its accompanying lower price — might make its way to the pumps.
“This change is expected to immediately increase oil supplies by 5-10% and drop gas prices,” a statement from Newsom’s office read. “When California did this in 2012, gas prices dropped by 25 cents within two weeks.”
While it’s nearly impossible to avoid the rising prices, Shupe says there are numerous things motorists can do to budget their fuel, including driving with properly inflated tires, obeying the speed limits, and parking in the shade to reduce heat buildup inside cars.
He also recommended storing all luggage in your trunk, as overhead storage can increase drag and reduce fuel efficiency. Shupe also reminded motorists that the faster the vehicle is driven, the more fuel that gets burned.
“If people reduced their freeway speeds by five to 10 miles per hour, they can increase fuel economy by up to 14 percent,” Shupe added.
His final recommendation for drivers: shop around for the cheapest gas instead of going to the station closest to home. Phone applications like GasBuddy and the AAA Auto Club App give real time prices at local gas stations.
Relief from soaring gas prices and inflation looks to be on the way for Californians who make less than $150,000 per year and filed a 2020 tax return by last October.
Back in June as gas prices reached upwards of $7, Governor Newsom signed a $9.5 billion tax bill to fund an inflation relief program, Middle Class Tax Refund, that would provide eligible Californians a one-time payment of about $1,050 maximum.
Residents who applied and qualified will see the check or direct deposit payment between October 2022 and January 2023.
Learn more at ftb.ca.gov/about-ftb/newsroom/middle-class-tax-refund/index.html.
Remember the Enron scandal when we were told that electricity prices were skyrocketing because of plant maintenance?