Pump prices set to climb
Average is expected to rise as high as $2.89 in the U.S. and higher in California this year.
You’ll have to dig a little bit deeper into your pocket at the gas station this year.
The average national price of a gallon of regular gasoline is projected to rise as high as $2.89, although over the course of the year the average probably will be more like $2.57, the highest price since 2014, according to the annual Fuel Price Outlook put out by GasBuddy, a Boston tech company that helps motorists find the cheapest gasoline in a given area.
The nation’s current average is hovering around $2.55 a gallon, according to GasBuddy data, and could hit the $2.89 peak in April.
The increase will hit California drivers harder because the average price for gasoline in the Golden State is higher (currently about $3.20 a gallon) partly because of higher taxes and the special blending requirements for fuel aimed at reducing air pollution.
“We won’t see record gas prices, but we have seen an increase over the last few years,” said Patrick DeHaan, head of petroleum analysis at GasBuddy.
As recently as July 2014 gasoline in California topped $4 a gallon, largely because the price of crude oil exceeded $100 a barrel.
Oil prices crashed to below $30 a barrel in February 2016 but have slowly increased since then, and DeHaan points to the Organization of the Petroleum Exporting Countries as the big reason why.
OPEC has reduced production in order to boost prices and, unlike in the past, its members have stuck to their pledges for the most part.
“The old way of thinking was all you could be sure of in life was taxes, death and OPEC cheating on production quotas, so that was a big surprise,” DeHaan said.
Oil inventories in the U.S. ended last year 54 million barrels lower than where they started in 2017, DeHaan said. Strong demand this year has brought inventories to nearly 64 million barrels below the year-earlier level.
The price of Brent crude — the generally accepted international price — has climbed to $69 a barrel and West Texas Intermediate — the domestic benchmark price — is up to $64 a barrel, cracking the $60 mark for the first time since June 2015.
U.S. shale producers may jump in to try to replace the production void and put some downward pressure on prices, DeHaan said, but for now the expectation is for gas prices moving higher this year.
Winter is usually a time of modest declines in fuel costs, but with brisk demand and rallying oil prices “it’s no surprise that gasoline prices continue to show frustrating strength for this time of year,” he said.
Political problems in Iran and continued economic catastrophe in Venezuela also pose the possibility of constraints on global production.
Higher prices come just two months after the price at the pump in California jumped because of a new gas tax of 12 cents a gallon, passed last year by the Legislature and signed into law by Gov. Jerry Brown.
Money from the Road Repair and Accountability Act is earmarked to fix the state’s highways, bridges and other transportation infrastructure.
A second iteration of the tax goes into effect in 2019 and will increase the price per gallon an additional 5.6 cents.
Former San Diego City Council member Carl DeMaio is leading an effort to repeal the tax and is trying to gather 585,407 signatures from registered voters by March to put the initiative on the November ballot.
DeHaan said drivers can ease the blow by looking for fuel stations that offer cheaper prices.
Motorists who drive 15,000 miles a year in cars getting 25 miles per gallon will pump 600 gallons into their vehicles. That comes to about $2,000 a year in fuel costs.
“Over the course of the year, you could end up saving a couple hundred bucks, easy, just by shopping around, and that’s what we suggest people do,” DeHaan said.
The price spread between one gas station and another can be dramatic.
DeHaan went to his computer and quickly looked at five stations within half a mile of one another in the Studio City area of Los Angeles. One station charged as much as $3.99 a gallon and another offered gas at $2.89 — a $1.10 difference per gallon.
“There are a lot of communities, especially the bigger cities where a lot of us live, that have this wild spread,” DeHaan said.