Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors’ opinions or evaluations.
California retail gas prices are approaching record high levels this week, averaging $6.42 at the pump on Wednesday, almost double the national average. But some experts forecast a drop in gas prices as soon as this week.
According to Bloomberg, wholesale gas prices in San Francisco and Los Angeles plummeted to their lowest level in over five weeks—a strong sign that pump prices will soon follow.
In Los Angeles, wholesale gas prices dropped on Tuesday by 1.3% to $4.90 per gallon from the day before, according to the U.S. Energy Information Administration.
“Last week, the Long Beach average was shooting up 15 cents overnight, then 12 cents–last night it was just one cent, so we think the big price spikes are behind us,” says Doug Shupe, corporate communications manager at AAA in Los Angeles.
Refinery Shutdowns Pushed Up Gas Prices
California’s astronomical gas retail gasoline prices have been caused by two issues: refinery shutdowns and California’s strict environmental laws, which require special gas blends.
California has its own unique gas market, according to Mark Agerton, assistant professor in the department of agricultural and resource economics at UC Davis. “California is an island for gas—we make it all here,” he says.
Recently, several California oil refineries have gone offline due to both expected and unexpected maintenance, leading to hefty price spikes.
“The reason is that the gasoline prices are so high now are different than earlier this year when Russia invaded Ukraine and sanctions raised prices,” Agerton says.
California’s tough environmental laws require refiners to produce a special blend of gasoline for the winter season. That’s contributed to the state’s trouble meeting demand.
California refines most of its gas in the state, but Singapore also produces the special blend of gas required. However, importing refined petroleum from Singapore isn’t a quick fix.
Last week, California Gov. Gavin Newsom approved the switch from summer-blend gas to cheaper winter-blend gas. Usually, this gas wouldn’t be available until November 1, but the switch is needed in light of the high gas prices across the state.
“In light of the dramatic increase in gas prices that California is experiencing, we should
not wait until the end of the month to start distributing or to ramp up production of our
winter-blend gasoline,” Newsom stated in a letter to the California Air Resources Board last week.
OPEC Likely Won’t Affect California Gas Prices—But Imports and Other Factors Will
While the news of OPEC+ slashing oil production by two million barrels per day may seem like bad news for gas budgets, experts say it’s unlikely it will have much effect on California’s gas prices.
“We’re dealing with a refinery capacity shortage in California; OPEC+ doesn’t affect refinery constraints,” Agerton says. “While OPEC won’t lower gas prices here, they won’t raise them either.”
Agerton agrees that the current price surge is short-term volatility due to California’s long-term clean energy policy choices.
As refineries begin to ramp up production and more cargos of gas come from Singapore, Shupe says gas prices will ease in the coming weeks.
However, while experts predict prices will retreat, they’re not sure how much—and there’s no guarantee that they will come down in time for holiday travel.
“Historically, high gas prices headed into holiday periods does not deter people,” Shupe says. “Road trips are still cheaper than flying.”
Millions of Californians will also get some monetary relief from sky-high prices as the Middle Class Tax Refund (MCTR) is scheduled to start hitting bank accounts this week and pays up to $1,050 depending on eligibility.
