Supply Squeeze Prompts Record Gas Prices

Published on


October 4, 2022

Supply squeeze prompts record gas prices

Average gasoline prices in Los Angeles have risen 63.4 cents per gallon in the last week, according to GasBuddy’s survey of 2,135 stations in Los Angeles. Prices in Los Angeles are $1.08 cents per gallon higher than a month ago and stand $1.93 per gallon higher than a year ago. 

The national average price of diesel has declined 2.9 cents in the last week and stands at $4.86 per gallon. According to AAA, the national average pump price for a gallon of gas maintained its recent surge, rising seven cents over the past week to hit $3.79. AAA put the Los Angeles Average at $6.47 on Monday. 

“With gas prices continuing to surge on the West Coast and Great Lakes, the national average saw its second straight weekly rise. But at the same time, areas of the Northeast and Gulf Coast have continued to see declines as the nation experiences sharp differences in trends between regions,” said Patrick De Haan, head of petroleum analysis at GasBuddy. “Some West Coast states saw prices rise 35 to 55 cents per gallon in the last week as refinery issues continued to impact gasoline supply, which fell to its lowest level in a decade in the region, causing prices to skyrocket. While I’m hopeful there will eventually be relief, prices could go a bit higher before cooling off. In addition, OPEC could decide to cut oil production by a million barrels as the global economy slows down, potentially creating a catalyst that could push gas prices up further.”

AAA also cited local supply issues as one factor in the disparity. 

“The regional differences in gas prices are stark at the moment, with prices on the West Coast hitting $6 a gallon and higher, while Texas and Gulf Coast states have prices dipping below $3 in some areas.” said Andrew Gross, AAA spokesperson. “At least six California refineries are undergoing maintenance, and there is limited pipeline supply to the West Coast from locations east of the Rockies.”

However, there are questions over just how much of the increase is driven by costs. 

Consumer Watchdog has asked California Governor Gavin Newsom to call a special session of the California legislature to address the unprecedented price of gas in the state.

The group said local regulations only add about 60 cents at the pump and said a new law sponsored by Senator Ben Allen (D – Santa Monica), SB1322, will help address questions over gas prices by requiring oil refiners to post monthly profits per gallon starting in January. 

Allen said refiners are not currently required to report their profits monthly, but many do report their regional profits to investors on a quarterly basis. According to Allen’s office, in just the second quarter of 2022, California’s five big oil refiners reported unprecedented windfall profits that topped $26 billion—making from three to ten times more in profits per gallon off their West Coast operations from April through June than they did in the same period last year.  

“For far too long, refiners in our state have been able to keep their profit margins under wraps,” said Allen, who chairs the Senate Environmental Quality Committee and the Legislative Environmental Caucus. “I am very pleased by Governor Newsom’s signing of SB 1322, finally giving California drivers more information about why they are paying so much at the pump amidst record gains by oil companies.”

Consumer Watchdog said record profits recently reported to investors shows the industry is reaping the benefits of high prices. 

“The oil industry has declared war on the state of California and is raising prices unreasonably to punish the public and lawmakers for enacting tough new laws,” said Jamie Court, president of Consumer Watchdog. “The state must fight back with a new law to take back windfall profits that the companies are almost certainly making from their $2 per gallon surcharge on California drivers. The oil refiners don’t have added production costs. They are simply charging more because they can and want to. That’s gouging.”

Kevin Slagle, vice president of strategic communications for the Western States Petroleum Association, described the allegations as “ridiculous” to CalMatters. 

“Despite bans, mandates and other policies that can increase energy costs, our members are doing all they can to produce and refine more energy and fuels to keep up with demand,” he said. “Keep in mind, the first $1.28 per gallon we all pay at the pump today goes to taxes, fees and regulatory programs imposed by the state. Our policy environment matters when it comes to energy costs. And our policy environment is getting more restrictive and costly every year.”

National demand for gas has increased in recent weeks and the impact of Hurricane Ian is still unknown on future supplies meaning drivers could see prices edge even higher. 

The state has said it will allow the sale of less expensive winter blend gasoline a month ahead of schedule to try to decrease prices but AAA said they were unsure how much impact the switch would have. 

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Consumer Watchdog
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