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Myra P. Saefong

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Oct. 8, 2022, 9:43 a.m. EDT

Why California is paying nearly 70% more for gasoline at the pump than the rest of the country

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By Myra P. Saefong

California has pretty much always paid much more than the nation for gasoline at the pump, in part due to higher taxes and a more expensive blend of fuel, but an average price that’s nearly 70% more than most everyone else in the U.S. is a bit extreme.

The national average price for regular gasoline is little changed from a month ago, but drivers in California have seen a jump of nearly 20% from Sept. 3, as refinery issues tighten supplies of the fuel in the Golden State.

The average price for regular unleaded gasoline stood at $3.765 a gallon early Monday afternoon, down 0.4% from $3.779 a month ago, according to data from GasBuddy . The average in California, however, was at $6.25 Monday, That’s 66% higher than the national average and up nearly 20% from $5.221 on Sept. 3.

The Golden State pays more than double the $3.024 average price for the state of Mississippi, GasBuddy data show. California’s average price also isn’t far from its record high of $6.429 from June 14 of this year.

There are “many refinery issues in the West, including six refineries that are either undergoing planned or unplanned maintenance,” said Patrick De Haan, head of petroleum analysis at GasBuddy, on Monday. “That has caused gasoline supply on the West Coast to drop to its lowest level in a decade and caused wholesale gas prices to skyrocket.”

Total motor gasoline inventories on the West Coast were at 24.9 million barrels for the week ended Sept. 23, at the lowest since 2012, according to data from the Energy Information Administration.

On Friday, California Gov. Gavin Newsom directed the California Air Resources Board to increase the state’s gasoline supply and lower fuel prices by allowing oil refiners to make an early switch to winter-blend gasoline.

Normally, most gas stations can’t stop selling the more environmentally-friendly, and expensive, summer-blend fuel, and start selling the cheaper, winter-blend gasoline until Nov. 1.

Following Newsom’s move, San Francisco-area gasoline prices are down 21 cents Monday, though Los Angeles is “still smoking hot” and up 8.31 cents a gallon, said Tom Kloza, global head of energy analysis at the Oil Price Information Service, a Dow Jones company, on Monday.

Kloza said he believes the “worst is over for California wholesale prices, and that might filter to retail prices in a few days.”

“Nationally, gasoline is like real estate — everything is tied to what region one lives,” he told MarketWatch, adding that most gasoline markets are up Monday on speculation surrounding the outcome for a meeting Wednesday of the Organization of the Petroleum Exporting Countries and their allies.

OPEC+ may agree to cut production in November by more than 1 million barrels a day, according to news reports, with concerns that a potential recession would lead to lower demand for oil.

Read: OPEC+ could cut oil production because it’s trying to halt a sharp crude selloff

An output cut could create a “catalyst that could push gas prices up further,” said De Haan.

Still, Kloza points out that the fourth quarter will not be a typical one.

“Deep recession might lead to modest prices, but other scenarios point to strength for crude /zigman2/quotes/211629951/delayed CL.1 +0.33% , gasoline and diesel,” said Kloza. “We will lose some Russia oil in early December,” as the European Union’s ban on Russia oil kicks in.

More important, about 3 million barrels per day, or perhaps 18% of U.S. refining capacity, “will be idled by work [maintenance] or events this month,” he said. “ That will keep upward pressure on gasoline, diesel and jet fuel but probably deter some of the speculative buying in crude.”

US : U.S.: Nymex
$ 69.61
+0.23 +0.33%
Volume: 4,539
Dec. 6, 2023 7:30p

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Myra P. Saefong is on the markets team in San Francisco. She has covered the commodities sector for MarketWatch for more than 10 years. She has spent the...

Myra P. Saefong is on the markets team in San Francisco. She has covered the commodities sector for MarketWatch for more than 10 years. She has spent the bulk of her years at the company writing the daily Futures Movers and Metals Stocks columns and has been writing the weekly Commodities Corner column since 2005. Myra has been with MarketWatch since 1998 and holds a master’s degree in English literature.

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