December 6, 2022

Raven Tribune

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Gas prices in California have hit a record high.  $5 gas could be coming soon

Gas prices in California have hit a record high. $5 gas could be coming soon

This isn’t just a problem for West Coasters: Some of the factors behind the record prices, particularly those related to switching to renewable fuels, could affect US gas costs nationwide in the next few years.

The US national average is currently $3.51 per gallon. Prices in California have always been among the highest, but have risen in recent years in part due to changes at some West Coast refineries. Facilities have closed in some cases, while others are being modified to refining renewable fuels such as diesel made from vegetable oil.

“California is the proxy for what will happen with the energy transition,” said Tom Cluza, global head of energy analysis at Oil Price Information Service, the company that tracks gas data for AAA. “A number of refineries have been permanently closed…Keeping people off fossil fuels may be the right thing to do, but it’s not without pain.”

That’s one factor: With lower refining capacity, the previous daily production of 2.5 million barrels on the West Coast heading toward the pandemic has fallen by about a quarter.

Klosa thinks $5 a gallon could hit California sometime in the second quarter, and possibly sooner if the gallon price Invasion of Ukraine by Russia, a major oil producer, is achieved. Other western states are also feeling the pain, like Hawaii—the only state averaging over $4, at $4.49 a gallon—as well as Washington, Oregon, and Nevada, where prices are at $3.90.

The switch to renewables affects prices in another way: higher taxes.

California gas taxes and fees are about 68 cents a gallon, compared to a national average of 39 cents, according to the American Petroleum Institute. Kloza said California imposes carbon taxes and fees of about $1.35 a gallon on wholesale gasoline, a cost to consumers.

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Most countries don’t have these [wholesale] Outlay. It’s an upcoming attraction for a number of blue states, Kloza said. If you want to keep people away from fossil fuels, you have to start charging carbon.

Meanwhile, California’s new record isn’t just the highest price ever for that state — it’s the highest price of any state. The second-highest record price was $4.70 a gallon in Alaska, but that was set in July 2008, when high oil prices drove a record national average of $4.11 a gallon.

Although the US national average of $3.51 per gallon is significantly lower than its California price of $4.72, the national price is actually rising faster on a percentage basis. Gas prices are up 6% nationally just in the last month and are up 40% over the past year, while California gas prices are up just 2% for the month and 35% for the past year.