Gas prices in California have reached unprecedented levels, with the average price at the pump soaring to $5.27 per gallon, a $0.23 increase from just a week ago. This surge in prices far surpasses the national average of $3.54 per gallon, which itself saw a $0.04 increase during the same period.
The main reason behind California’s skyrocketing prices is attributed to refinery challenges, particularly the halting of gasoline production at an important Phillips 66 refiner in the Bay Area in favor of renewable diesel. Additionally, scheduled maintenance at two critical refineries in May, along with speculative buying in global markets, has led to wholesale prices going “ballistic,” according to Tom Kloza, global head of energy analysis at OPIS.
Kloza predicts a correction in gasoline and crude prices in the next 30 days, as the current premium of almost $60 per barrel for gasoline in San Francisco over current crude levels is unsustainable. Last year, California passed the Gas Price Gouging and Transparency Law to regulate refinery margins, and regulators are set to meet next week to establish specific rules.
Despite the state’s traditionally higher gasoline prices due to special blend requirements and carbon emission reduction initiatives, the current surge in prices may lead to supply issues as some gasoline importers may halt business in California. With gasoline inventories falling in the US and strong demand expected during the summer driving season, consumers may soon face tough decisions as prices continue to rise.