By Rob Nikolewski, SAN DIEGO UNION TRIBUNE
San Diegans have another bit of inflation aggravation to deal with as the average price for regular-grade gasoline is back over the $5 per gallon mark.
Prices at stations in the greater San Diego area are up 21 cents per gallon in the past month and 8 cents in the last seven days, according to the AAA. The average price on Monday stood at $5.019.
“The price increase has not been particularly drastic,” said Marie Montgomery, public affairs specialist for the Auto Club of Southern California. “Unfortunately, it’s not a new occurrence for the area.”
Fuel analysts have attributed the recent run-up mostly to the annual transition from winter-blend gasoline to California’s summer blend that is less polluting but more expensive, which means refineries reduce production to make the switch.
Times vary by company, but the switch can run from the latter half of February to the end of April, or even into the start of May. The summer blend is about 20 to 25 cents per gallon more expensive than winter blends because of the oxygenates required in the fuel.
The Oil Price Information Service, or OPIS, reported Friday that California refinery production for the week fell 9 percent.
“Refineries want to do maintenance before the summer driving season begins,” said Patrick De Haan, head of petroleum analysis at GasBuddy.
In addition, the price of Brent crude — the international benchmark for futures trading — has increased 6 percent in the past month, largely due to attacks on Russian energy infrastructure by Ukraine and a recent announcement by the Organization of the Petroleum Exporting Countries (OPEC) and its allies to keep reducing output by 2.2 million barrels per day through June.
In California, the international price of oil is more important than the price of domestically produced crude — known as West Texas Intermediate — because the Golden State relies on overseas fuels. In 2023, 61 percent of oil supply sources to the state’s refineries came from foreign imports, according to the California Energy Commission.
Inflation has hit consumers hard in the past four years. According to a recent report from the Legislative Analyst’s Office, the nonpartisan fiscal and policy adviser to lawmakers in Sacramento, overall prices have increased 20 percent compared to 2020.
Energy prices, which include gasoline, have been the most volatile, up 31 percent as of Feb. 1. Food prices are up 26 percent.
What’s the outlook for gas prices this summer?
“There’s not as many refineries in California and we haven’t seen any major issues this year yet,” said DeHaan of GasBuddy. “If we can escape some of those refinery outages, I’m hopeful that $5 (a gallon) will not be a mainstay of summer; it may be just below that.”
Multiple refinery outages in late summer and early fall in the past two years were major contributors to price spikes in California. The San Diego region hit an all-time record of $6.435 for a gallon of regular on Oct. 5, 2022, and soared as high as $6.249 on Sept. 29, 2023.
In response, Gov. Gavin Newsom instructed the California Air Resources Board to waive the summer blend requirement and speed up the delivery of less expensive winter-blended gas to stations across the state, which resulted in prices in 2022 and 2023 sharply declining.
With drivers complaining, Newsom accused oil companies and petroleum refiners of “ripping off” customers and with his urging, California’s Legislature last year passed Senate Bill X1-2.
Hailed by the Newsom administration as the nation’s “first price-gouging law, SB X1-2 requires the oil industry in California to produce much more data about imports, maintenance schedules and refinery profit margins.
It also created the Division of Petroleum Market Oversight to monitor the oil and refinery industry. The division has been granted subpoena power and the ability to penalize oil companies if they exceed a “maximum gross refining margin” that will be set by the California Energy Commission.
The energy commission hosted a public workshop last week about how to implement SB X1-2’s enforcement rules and received criticism from both ends of the political spectrum.
Jamie Court, president of Consumer Watchdog, supports the new law but says the commission needs to put specific financial sanctions in place as soon as possible.
“The legislation was passed a year ago,” Court said, referencing a letter signed by 23 public interest groups. “Californians need the penalty in place before summer, when gas prices and oil refiner profits are expected to spike again. It’s time for the energy commission to take decisive action.”
Julia May, senior scientist for Communities for a Better Environment, said, “we need this scrutiny” to look at “problems such as the oil industry shutting down major refining capacity for maintenance at inopportune times, adding to price spikes as well as problems in the spot market.”
On the other side, the general counsel for the Western States Petroleum Association said there are already “numerous federal and California regulations” on the books concerning refinery maintenance and operations.
“If it’s true that the industry is motivated by greed, then why are gas prices cheaper in other states than it is in California?” said Tim Taylor, California Legislative Director for the National Federation of Independent Business, pointing to the state’s high taxes and fees on gasoline. “We think it would be a reasonable argument that we could probably cut 50 to 70 cents a gallon right now in California by asking the Legislature to do that.”
California’s average price per gallon on Monday came to $4.922, according to AAA. The average price in the U.S. was $3.534.
The finalized draft regulations are expected to be presented for potential adoption at a California Energy Commission business meeting on May 8.
This story originally appeared in San Diego Union-Tribune.
