Prices up in gas ripple effect
Average in California is up to $3.04 a gallon, according to AAA
With Hurricane Harvey slamming into the Texas Gulf Coast’s oil-refining and transportation hub, this year’s Labor Day weekend rise in the price of gasoline has become anything but typical.
Drivers throughout the Bay Area and across the state should expect prices at the pumps to remain elevated for the next couple of weeks, even though California’s gasoline doesn’t come from Texas. We’re just experiencing the ripple effect from Harvey’s disruption of the U.S. gasoline market.
According to the American Automobile Association, the average price for a gallon of regular unleaded gas in California reached $3.04 a gallon Friday. That was just 5 cents a gallon more statewide than a week ago, but it’s 13 percent higher than the $2.68-agallon average during last year’s Labor Day weekend.
The situation was the same Friday in the Bay Area’s major metro areas.
In San Jose, regular unleaded was selling for $3.08 a gallon, on average, while in Oakland, motorists were paying an average of $3.09 a gallon, AAA reported.
Yet, those lofty prices could be
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seen as bargains compared with San Francisco, where stations were pumping out regular unleaded for $3.19 a gallon, on average, AAA said.
The increase in California prices come as costs for the state’s cleaner-burning fuel requirements are compounded by the disaster in Texas, which slashed supply in the broader U.S. market.
“What we’re seeing is a ripple effect,” said Tom Kloza, global head of energy analysis for research firm Oil Price Information Service, in Wall, New Jersey.
“To start, in California, you have the toughest gas to make in the country. And with Harvey, we’ve had the single-largest shutdown of refining capacity I’ve seen in 42 years of covering the oil industry.”
The U.S. Energy Information Administration says California is the third-largest oil-refining state in the country, and accounts for a 10th of the nation’s petroleum-refining capacity.
However, as production in California, and Alaska, has declined, the state has come to rely more upon foreign oil sources, which now contribute more than half the crude oil refined in California.
Because of state and federal regulations, California requires that all motorists use a specific blend of gasoline called California Reformulated Gasoline, or CalRFG for short, which is refined in the state.
The costs of refining fuels here, along with associated federal and state taxes, all add up to make California one of the most expensive states in the country for gasoline.
Only Hawaii, where AAA reported on Friday gasoline was averaging $3.09 a gallon, has a higher average gas price.
California’s gasoline prices look even more shocking compared with the national average. But the rest of the nation is seeing greater price hikes as a result of Harvey. According to AAA, regular unleaded gas hit a nationwide average of $2.52 a gallon on Friday — up seven cents from Thursday’s average.
A week ago, the national average for regular unleaded was $2.35 a gallon, according to AAA.
By comparison, last year, consumers paid an average of just $2.22 a gallon across the country to fill up their tanks before heading out on Labor Day sojourns.
Dan Flynn, energy analyst at Price Futures Group in Chicago, said gasoline prices nationally should begin to slip back down by mid-September.
“The spike should be short-lived,” Flynn said. “For now, it’s like a trickledown effect going on. When there’s tightness in supply, deliveries are going to be impacted. And everyone is going to pay at the pump, even if they normally don’t use gas from the Gulf.”