Californian owners of gas guzzlers, beware. We may soon be approaching $4 gasoline once again.
It’s been nearly four years since motorists in the Golden State saw that high of a price for petrol, which peaked at four bucks a gallon in the summer of 2014. But now, at least according to some industry observers, those bad ol’ days may be back by Memorial Day.
California already has the country’s highest-priced gasoline, currently averaging $3.30 a gallon.
With global oil markets starting to climb, that average could climb by more than 10 percent, says Patrick DeHaan, head of petroleum analysis at Boston-based GasBuddy, which monitors fuel prices across the U.S.
Here are five reasons why $4 gasoline may be in California’s not-too-distant future:
The Trend Has Already Begun
Pump prices, which include taxes, are already 47 cents over the same time last year in California, the biggest statewide price change in the U.S.
“We are soon to be February and we are seeing the year’s lowest prices,” DeHaan told Bloomberg News in a phone interview Wednesday. “The concern is that a year ahead will have a much higher floor than what we saw last year.”
Crude Prices Have Been Rising
While some analysts are predicting the price of crude to soon fall, the cost of brent crude has been soaring – up over 90 percent in the past two years. Brent crude, the international benchmark which plays a significant role in the price of gas at the pump, is now trading around $68 a barrel. Nationally, gas prices are averaging 10 cents more than a month earlier and 30 cents more than one year ago.
Across the country, motorists in 47 states and Washington, D.C., have been hit with pump-price increases of as much as 9 cents with the Great Lakes, Central, South and Southeastern states seeing the largest increases.
“Compared to the first few weeks of January last year, consumer gasoline demand is noticeably higher, which is surprising given the frigid winter much of the country has experienced this month,” AAA Oklahoma spokesperson Leslie Gamble told the Enid News & Eagle in Oklahoma. “But demand isn’t the only factor driving prices up. Crude oil has been selling at very expensive rates the past few months. Those higher market prices are now trickling over to consumers at the pump.”
California’s Also Being Hit Harder by Fuel Taxes
California consumers are also facing additional state taxes on gasoline. Starting in November, motorists have been paying 12 cents more per gallon for gasoline and 20 cents more for diesel. This was the second of two increases last year, following a gas tax hike in July.
Global Realities are also Adding to the Uptick
One of the key factors driving gas prices higher is falling supplies of oil. The Organization of Petroleum Exporting Countries has kept a tight lid on output following a recent deal to extend oil production cuts. OPEC agreed to cut oil production in November 2016 and that’s had a slow-rolling effect on prices going into 2018. In addition, declining production in Venezuela, which is being roiled by political and economic turmoil, has contributed to the price spike.
Finally, It’s Almost That Time of the Year
Seasonal demand dramatically affects oil and gas prices. We’ve all heard the message before: you can expect them to rise every spring. And that’s because oil futures traders know that demand for gasoline jumps in the summer as vacationing Americans hit the road so they start buying futures contracts in the spring in anticipation.
And, yes, springtime will be here sooner than you realize.
