Why has gasoline in California gone above $6 a gallon?

(Trends Wide) — For many California drivers, the prospect of paying $6 a gallon for gas is no longer something to worry about in the future. It is already a reality.

In Los Angeles County, the most populous in the country with more than 10 million inhabitants, gasoline reached an average price of US$6.02 per gallon, according to the American Automobile Association (AAA). Gasoline prices have also broken the $6 barrier in some mainly rural California counties, while other population centers, such as San Diego, San Francisco, Orange and Ventura counties, are within cents of prices. $6 per gallon.

California prices continue to rise even though the national average has been falling—slowly but steadily—for the past two weeks.

Nationwide, the average price of gasoline stood at $4.24 this Wednesday, according to AAA, below the record of $4.33 per gallon set on March 11. Since then, the national average has dropped a fraction of a cent each day, proving the old adage that gas prices go up like a rocket and come down like a feather.

But not in California, where average prices continue to climb, rising 15 cents to $5.87 a gallon since hitting the national high just under two weeks ago. The same is true in Nevada, which gets much of its gasoline from its neighbor to the west, and where prices have risen 24 cents a gallon to $5.16. In Hawaii, prices rose 25 cents to $5.09 a gallon, rounding out the trio of states facing more than $5 a gallon gasoline.

multiple markets

The main reason for the price disparity is that there are essentially seven large wholesale gasoline markets in the United States: two in California, one for the Pacific Northwest, and the remaining four spread across the rest of the country. That means that for those living west of the Rockies, prices continue to rise or, at best, remain flat.

Prices rose 6 cents in Utah, which also receives gas through California pipelines, to $4.41, and are largely unchanged in Washington, Oregon and Arizona.

A major factor in the current price spike is an unscheduled outage at a major refinery in Torrance, California, three weeks ago that made an already tight market for gasoline even tighter, said Doug Shupe, spokesman for the Auto Club. from Southern California.

“This is not a planned maintenance issue. It can take two to four weeks for a refinery to get back to full capacity,” Shupe said. “We know that drivers are frustrated by this, especially when faced with higher prices for the rest of their lives.”

Losing even one refinery may cause prices to rally in the West, as capacity has been steadily declining on the West Coast.

Data from the US Energy Information Administration shows that refining capacity in western states at the end of last year fell 12% from the end of 2019, before the pandemic, and 22% from the end of 2019. 2007, before the Great Recession.

Some of those refineries closed for economic reasons during those tough economic times. Now some are being converted to process renewable fuels, like Marathon Petroleum’s refinery in Martinez, California. That Bay Area facility stopped refining petroleum products in 2020 and will soon reopen as a renewable diesel refinery.

But the loss of that facility, and others, in recent years also means that an unexpected problem like the Torrance shutdown can roil wholesale gas markets, said Tom Kloza, global head of energy analysis for the Gas Service. Oil Price Information, which tracks gas prices for PRASA.

Concerns about tightening environmental standards in Western states are preventing oil companies from investing in refineries in the region, according to Kloza, fearing they will be forced to close in the near future.

“The West Coast is pretty rough right now,” he said. “They could use a little more refining capacity or a little less demand.”