Well, it was a nice run while it lasted.
After the average price for a gallon of regular in the San Diego area soared to $6.249 on Sept. 29, gasoline prices started falling on practically a daily basis. But the three-month retreat seems to have bottomed out.
Three days before Christmas, the average price fell to $4.733, according to AAA, and has ticked up slightly. The average price at gas stations around the region stood at $4.776 on Tuesday.
“It looks like prices have reversed course,” said Marie Montgomery, spokeswoman for the Auto Club of Southern California. “They’re going up, but not very quickly.”
A couple of refinery issues in the Los Angeles area, fuel analysts say, led to prices leveling off. The Wilmington section of Marathon Petroleum’s refinery on Dec. 16 reported an “unplanned flare event,” as did the Chevron refinery in El Segundo on Dec. 26.
And while it’s the beginning of January on the calendar, refineries in California next month will start transitioning to summer-blended gasoline that then gets distributed to gas stations across the state starting in February.
To reduce smog, the summer blend is about 20 to 25 cents per gallon more expensive than winter blends because of the oxygenates required in the fuel, and refineries have to briefly shut down before processing it.
Plus, refineries typically start their facility maintenance schedule in the first quarter of the year, which reduces output. Times vary by company, but can run from the latter half of February to the end of April, or even into the start of May.
But Patrick De Haan, head of petroleum analysis at GasBuddy, thinks there’s a decent chance that prices could go back down before the turnarounds happen.
“The window is closing pretty quickly,” De Haan said, but “if these (refinery) issues can get sorted out in the next one to two weeks, I’d say that we could maybe go down another 20, 25 cents (per gallon) before we start to see the seasonal uptick.”
When gas prices skyrocketed last August and September, Gov. Gavin Newsom on Sept. 28 instructed the California Air Resources Board to issue a waiver to deliver the less expensive winter-blended gasoline ahead of schedule. The move had a nearly instantaneous effect, with prices dropping throughout October, November and into December.
It marked the second year in a row that Newsom issued the waiver to blunt soaring prices at the pump. In 2022, gas prices across California hit all-time highs, with San Diego prices reaching a peak of $6.435 on Oct. 5, 2022, according to AAA.
With drivers complaining, Newsom accused oil companies and petroleum refiners of “ripping off” customers. The Legislature in Sacramento, controlled by Democrats, early last year passed Senate Bill X1-2 that Newsom signed into law.
In effect since June 26, SB X1-2 requires the oil industry in California to produce much more data about imports, maintenance schedules and refinery profit margins.
It also created the Division of Petroleum Market Oversight to monitor the oil and refinery industry. The division has been granted subpoena power and the ability to penalize oil companies if they exceed a “maximum gross refining margin” that will be set by the California Energy Commission.
Last week, health officials in Contra Costa County in Northern California made a surprise inspection at the PBF Energy refinery in Martinez, complaining that 46 reports of flaring since November 2021 and 21 releases or spills of hazardous materials are “unacceptable.”
But Newsom’s critics and industry officials say California’s high gas prices are largely due to the state’s high fuel taxes and fees, as well as policies that hinder oil and petroleum development.
For decades, no major oil refineries have been built and the number of California’s existing refineries has fallen from 17 in 2015 to 14 in 2023. Total refining capacity from 2019 to 2023 has dropped 8.86 percent in California, while nationally it dropped 3.95 percent.
Fewer refineries means “less capacity when it’s needed most,” De Haan said, “and when you have two refineries go down, now it’s a lot bigger problem than two refineries doing down five years ago.”
Drivers have experienced whiplash at the pump.
On Jan. 2, 2019, GasBuddy reported an average price per gallon in San Diego of $3.222. A little more than a year later, at the onset of COVID-19, prices plummeted as roads and highways emptied. The price of oil even went negative for one day.
Then, as the economy rebounded, prices came roaring back, surpassing the $6 per gallon mark in both 2022 and 2023. While prices at the start of 2024 are a lot lower than $6, they are significantly higher than they were pre-pandemic.
James Hamilton, professor of economics at UC San Diego, said consumers notice when the price of an item goes up more than when it goes down.
“Whenever oil prices hit a significant new high, there is often a shock effect,” Hamilton said. “People still fill up the gas tank, but become pessimistic about the future and can postpone spending on big-ticket items. But eventually people get desensitized. If the price drops temporarily and then goes back near where it had been, the second time we don’t see as big an effect on consumer behavior.”
Looking ahead, GasBuddy estimates California gas prices will average $4.26 to $4.65 in 2024.
“We assume there are going to be some (refinery outages),” De Haan said, “but we have to think that 2023 was a truly exceptional year and that it will not be repeated, given the amount of pressure now on refineries from a political standpoint and given the (California Energy Commission’s) mission to follow this more carefully and organize refinery turnarounds.”
The national average for a gallon of regular on Tuesday came to $3.104, according to AAA, while the average price in California was $4.709.
