Drivers To See Some Relief At Gas Pump

Published on

Expert: Per-gallon price to drop back below $4 by Halloween


October 17, 2019

With the average price of regular gasoline in San Diego dropping 5 cents in the past eight days, it looks as though the recent spike in gasoline prices has crested.

“The worst is over,” said Patrick DeHaan, head of petroleum analysis at GasBuddy, a tech company that helps drivers find the cheapest places to fill up.

The average price of a gallon of regular gasoline in San Diego rocketed from $3.63 in mid-September to a high of $4.20 on Oct. 8 – an increase of 57 cents, or 15.7 percent – but DeHaan said a peek at wholesale gasoline prices in the Los Angeles futures market indicates an accelerated price drop is on the way.

“Actually, the price decline is a little slower than I would have anticipated,” DeHaan said. “But I think in the weeks ahead we should see weekly drops of probably somewhere, I’m hoping, in the double-digit region – 10 cents or 12 cents (a gallon). The downward momentum should pick up steam.”

Barring any unexpected disruptions, DeHaan predicted the average price per gallon in San Diego dropping below $4 a gallon by Halloween.

The surge in prices was due to a host of reasons, including multiple planned and unplanned refinery closures across the state. On top of regular maintenance as refineries make the annual transition from “summer blend” gasoline to “winter blend,” two refineries in Northern California and two in Southern California went offline last month.

But those refinery issues have largely been resolved.

There were concerns another refinery incident could lead to a gasoline price spike, but an explosion Tuesday afternoon at the NuStar facility in the Northern California town of Crockett affected two fuel storage tanks that held only low volumes of ethanol. “I would quantify it as a small headache for stations that are filling up at this facility,” DeHaan said. NuStar officials reported no injuries.

Last month’s price spike also coincided with a missile attack in Saudi Arabia on oil facilities estimated to account for about 5 percent of the world’s daily production of crude oil. The Saudis have blamed Iran for the attack; Iran denies any involvement.

California is more reliant on crude oil imports from places like Saudi Arabia because the Golden State has no direct pipeline connections to receive oil from Texas or the Bakken shale formation in North Dakota.

According to the California Energy Commission, 57.5 percent of crude oil supply to California refineries in 2018 came from foreign sources and Saudi Arabia accounted for more than one-third of that (134.8 million barrels). West Coast markets also have to compete with Asian markets for Saudi oil.

Fuel experts said about 15 cents of the initial increase in prices in California last month could be traced to the attack. But oil production in Saudi Arabia has rebounded since then.

“The Saudis have gotten most of their oil processing facility back online and the market is disconnecting from what happened there,” DeHaan said.

Crude oil prices have also been trending down in recent weeks. The price of West Texas Intermediate, the benchmark price of domestic crude, rose to $62.90 a barrel following the attack but finished Wednesday’s trading day at $52.97. The price of Brent crude, the international benchmark, reached $69.02 per barrel after the missile attack but closed Wednesday at $59.10.

“Essentially, what is happening now is an undoing of things that caused prices to go up,” DeHaan said. “The market is coming back down.”

De Haan thinks the average price for regular could go back to the $3.63 per gallon range seen before the spike.

“Motorists should not be in a rush to fill up,” he said. “Hold off as long as you can; buy what you need. Prices will be coming back down and I’m hopeful that the price drops will accelerate.”

Jamie Court, president of Santa Monica-based Consumer Watchdog, was not as positive. His group has long contended that oil refiners have artificially kept prices high in California.

“It’s like being robbed on the highway and then down the road finding a little bit of the change they took from you like crumbs,” Court said. “It’s hard to feel good about a small dip in price when we’re still paying … more than we should.”

A preliminary report released in May by the California Energy Commission said since an explosion at an ExxonMobil refinery in Torrance in February 2015, the state’s already high gasoline prices went up even more. But after normal operations resumed, the “residual price increase” has remained.

Among the possible explanations, the commission report said, is a higher rate of price increases at retail brands such as Chevron, Shell, ExxonMobil and Union 76 than at unbranded retailers. Since 2016, the difference has increased from about 15 cents a gallon to around 40 cents.

The energy commission is expected to release its final report to Gov. Gavin Newsom by the end of the month.

California has the highest gasoline prices in the nation – an average of $4.17 per gallon for regular, compared to a U.S. average of $2.66 a gallon, according to AAA.

This summer, the second iteration of Senate Bill 1, a gas tax passed in the spring of 2017, went into effect that added 5.6 cents a gallon on each purchase in the state. That boosted California’s total excise tax to 41.7 cents per gallon.

Called the Road Repair and Accountability Act, SB 1 will raise $52.4 billion over 10 years. An attempt to repeal the bill, led by former San Diego City Council member Carl DeMaio, made it onto the statewide ballot in November but Proposition 6 lost, 56.8 percent to 43.2 percent.

[email protected]

Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

Latest Videos

Latest Releases

In The News

Latest Report

Support Consumer Watchdog

Subscribe to our newsletter

To be updated with all the latest news, press releases and special reports.

More Releases