Bay Area paying the most for gas, likely until 2022

Gas prices in the Bay Area continued inching higher Tuesday, reaching a record average of $4.86 per gallon Tuesday in San Francisco and prices above $5 on many station signs.

According to GasBuddy, a company that tracks gasoline prices across the nation, Bay Area drivers are paying the highest per-gallon prices in the nation, easily exceeding the state average of $4.73 and the national average of $3.42. Average prices provided by the American Automobile Association were slightly lower but also indicate record per-gallon prices at the pump.

Elsewhere in the Bay Area, gas prices were lower — but not by much. The average price in both Oakland and San Jose was about $4.77, according to GasBuddy. Los Angeles’ average price was $4.66 and Sacramento’s $4.69.

A bubbling brew of reasons can be blamed for the high gas prices, starting with the pandemic.

Gasoline consumption plunged by about 60% when people parked their cars and hunkered down at home. Crude oil prices fell, and many refineries and oil production facilities laid off workers and cut output, said Patrick De Haan, head of petroleum analysis for GasBuddy.

When demand started to return significantly last spring, gas and oil producers had to play catch-up. Gas prices across the country started rising then, and have kept climbing, he said.

“You don’t just flip a switch,” he said, and instantly start pumping oil from the ground and processing it at refineries at pre-pandemic rates.

Production did ramp up, but energy crises in China, which is seeing a surge in the demand for electricity, and Europe, which hasn’t been getting as much gas as usual from Russia, boosted the demand for gas and oil and helped push crude oil prices higher, De Haan said.

“In the last eight weeks, because of the global supply crunch, we have seen a surge in gas prices,” he said.

Californians were also hit when last month’s atmospheric river inundations slowed production at some refineries.

California drivers pay more at the pump due to a variety of factors that don’t exist in most other states — including high taxes and fees on gas, state airpollution standards and a limited number of refineries, De Haan said.

“All of that adds up,” he said. “It is tremendously hard to operate a refinery in California due to all the requirements.”

Bay Area gas prices, particularly in San Francisco, are higher because of things like the high costs of living, the limited number of gas stations and the few refineries in Northern California, De Haan said.

For the past five years, he said, California has typically held the title of most expensive state to buy gas, a dubious distinction that had long been held by Hawaii, which has no oil reserves and just a single refinery.

“The price in the Bay Area for gasoline is some of the highest within the state of California,” said Sergio Avila, a AAA spokesperson. “There is that upward mobility and upward trend that we’re still in, and we could get to an average of $5 a gallon in the San Francisco area.”

AAA predicted that California gas prices will continue increasing ahead of the Thanksgiving holiday. About 53.4 million Americans are expected to travel for Thanksgiving, and 90% of them will likely choose to drive to their destination, Avila said.

Prices typically go down after Labor Day because the demand also drops, and the summer clean-air formula for California’s gas is no longer required, but that hasn’t been the case this year. The current price of crude oil has been over $80 a barrel for several weeks, and it determines about 60% of what people pay at gas stations, Avila said.

Californians should expect gas prices to remain high, perhaps with a slight dip, through the holidays, De Haan said, and possibly not falling until the spring when production is expected to increase significantly. He expects prices to remain around $4.75 in the Bay Area through at least the end of the year.

Avila said it’s difficult to predict when gas prices will begin to retreat.

“It’s really hard to say when there might be some relief ahead for drivers,” he said.