Will California ever see gas under $5 again?

(KTLA) – It wasn’t all that long ago that a big tank of gas cost less than $100 to fill in California.

The statewide average for a gallon consistently flirted with and surpassed $6 per gallon in May, nearly two full dollars higher than a year earlier, according to AAA data. The invasion of Ukraine and resulting sanctions pushed prices higher at the start of spring, but now drivers are left to try and figure out how much of the recent gains are temporary and how much of the added cost is here to stay.

“I think right now there’s a lot of anxiety and uncertainty, and when that happens, the prices go up,” says Marie Montgomery, spokesperson for the Automobile Club of Southern California.

California gas prices are consistently higher than the national average thanks to a combination of geography, environmental policy, taxes and fees. The state is not well connected to the eastern U.S., meaning disruptions aren’t easily blunted by diverting supply from elsewhere.
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Tom Kloza, Global Head of Energy Analysis, for OPIS – an energy analysis group – says the war in Ukraine is just one of the factors affecting the prices Californians and others are paying. He lists the speedy rebound in demand from COVID, reduced refining, and underwhelming production from the nations that make up OPEC+ as additional drivers of the higher costs.

Improvement in any single area could reduce our prices.

“I would bet on California seeing an average price below $5 gal before it ever passes $7 gal, but these markets can go from the townhouse to the penthouse and back to the outhouse very quickly,” Kolza said over email, while pointing out that Americans have historically enjoyed relatively inexpensive fuel.

Experts say if supply is restored, there is no reason to think prices won’t fall considerably. But not all of the run-up is based on a shortage of supply.

“Inflation plays a big role right now,” says Montgomery. “We can’t forget that we were breaking price records back in November also, before any of the war or any of that.”

Fuel costs are one of the primary causes of inflation with most consumer goods, but inflationary costs may also hit your local gas retailer, and those increases are less likely than supply disruptions to vanish in the future.

“The last time that we had these record high prices in 2012, 2013, 2014, they were in the $4 range, not in the $6 range. But even back then the overhead costs for gas stations were far lower,” says Mongomery. “Salaries are higher, the overhead is higher. So there are all these pressures as well.”

Ultimately the experts agree that there is reason to be optimistic for relief from $6 gas in the future, but uncertain fixes to supply constraints and inflation mean the new normal is likely higher prices than we were used to a few years ago.

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