Drivers Experience Rapid Surge in Gas Prices Amid National Upward Trend
Gas prices have surged nationwide, with California experiencing a drastic spike. On Friday, the Golden State saw an average pump price increase of $0.23, reaching $5.27 per gallon, as reported by AAA. In contrast, the national average stood at $3.54 per gallon, marking a $0.04 rise over the same period.
Tom Kloza, OPIS’s global head of energy analysis, attributes California’s price surge to refinery challenges, notably the cessation of gasoline production at a key Phillips 66 refinery in the Bay Area in favor of renewable diesel. Kloza highlights upcoming maintenance at two critical refineries in May, coupled with speculative buying in global markets, as additional factors propelling wholesale prices to unprecedented levels.
Kloza’s analysis reveals that gasoline in San Francisco, excluding taxes and other expenses, commands a premium of nearly $60 per barrel compared to current crude levels. On Friday, West Texas Intermediate (CL=F) futures surpassed $86 per barrel, while Brent (BZ=F), the international benchmark, settled above $91 per barrel.
Kloza warns that these imbalances are unsustainable, anticipating a correction in gas prices within the next 30 days, as historical petroleum trends suggest.
California enacted the Gas Prices Gouging and Transparency Law last year, aiming to regulate refinery margins. Next week, regulators will convene to finalize specific rules.
Andy Lipow, president of Lipow Oil Associates, cautioned that the law’s mandates might prompt some gasoline importers to cease operations in the state. This potential outcome could exacerbate supply challenges precisely when external supplies are crucial.
Historically, California’s gasoline has commanded higher prices than the national average due to the state’s unique blend requirements, which incur greater production costs. Moreover, California imposes elevated taxes and fees linked to initiatives targeting carbon emission reduction.
Gasoline inventories in the United States have experienced a decline in recent weeks, indicating robust nationwide demand.
Regina Mayor, KPMG’s global head of clients and markets, emphasized the onset of the summer driving season, anticipating a sustained growth in gasoline demand. This trend is expected to propel prices upward in the short term, as Mayor recently conveyed to Yahoo Finance.
Despite the anticipated surge in demand, Mayor anticipates a threshold beyond which consumer behavior may shift. She warns of potential demand destruction if gasoline prices escalate to levels deemed prohibitive.
“While recognizing the necessity of vehicle usage for daily commutes and familial responsibilities, such as transporting children to school, consumers may reconsider their travel plans during the summer holiday if gas prices surpass what they perceive as acceptable,” Mayor remarked.
