Why California Gas Prices Are $2 Above the National Average

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Gas prices across the United States have been on the decline for weeks. After a summer high, prices have dropped by as much as $3 in some places. Don’t count California in with these places, though: As the Orange County Register reports, gas prices in the Golden State are sitting around $2 more per gallon than the national average in most areas of the state.

As of September 26th, the national average for gas prices sits at $3.72 per gallon. California? An annoying $5.79 per gallon. Just what the hell is going on?

While some may point to political explanations for the price disparity, the true reason behind the California price hike is simpler. Most fuel sold in California comes from local refineries — the state is what’s known as a “fuel island.” A few local companies run the refineries that supply most of the state. While this may look good on the surface, it can lead to regional price spikes whenever there’s an issue with one of the refineries.

A rep for the Oil Price Information Service explained to the the O.C. Register that many oil companies skipped their usual equipment maintenance this spring. A spike in fuel prices, attributed to the war in Ukraine, encouraged refineries to keep pumping out fuel, rather than stopping their equipment for upkeep. Now, that short-term thinking is causing problems, as equipment failures and outages at some refineries cause reduced output, leading to higher prices.

The California Energy Commission calls these “temporary” production issues, but coupled with refineries performing deferred maintenance and “lower-than-normal gasoline inventories,” the result is higher fuel prices for California drivers.

There are other factors at play too. California has the nation’s second highest gas excise tax, and environmental regulations call for a special blend of fuel to be sold here to combat pollution and smog. Those factors combined add as much as $1.54 to the price of a gallon of gas in California. Prices get worse when you narrow the search down to specific areas. Los Angeles and Long Beach, for instance, average $5.84 per gallon right now, an increase of roughly 41 cents per gallon compared to the week prior. Orange County is averaging $5.83 per gallon, up 44 cents from the week prior. Inland areas are faring slightly better, averaging $5.70 per gallon in Riverside and San Bernardino. And prices are expected to climb even higher.

Meanwhile, oil companies are raking in the profits; September was a boom month for the oil industry. As Tom Kloza, a representative with the Oil Price Information Service, told the O.C. Register, Los Angeles-area refineries can expect to earn as much as $101 in gross profit on a barrel of oil; compare that to Gulf Coast refiners, who typically get a gross profit of less than $7 per barrel.

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