In an attempt to curb a recent spike in gasoline prices, Gov. Gavin Newsom late Thursday instructed California regulators to speed the delivery of less expensive winter-blended gas to stations across the state.
Winter-blended gas is about 20 to 25 cents per gallon cheaper than summer-blended gas and fuel analysts expect the waiver put in place by the California Air Resources Board at Newsom’s behest will lead to a dip in prices within a few days.
“This waiver will affect wholesale gas prices probably on Friday,” said Patrick De Haan, head of petroleum analysis at GasBuddy, a tech company that helps drivers across the country find the cheapest places to buy gas. “But there’s only one day left in the trading week. That may segue into another drop on Monday and theoretically retailers could be ing that along in lower prices this weekend, but it’s not going to be much at first.”
The move comes as the average price for a gallon of regular gasoline statewide sured the $6 per gallon mark Thursday, according to AAA.
In San Diego, prices are even higher, rising nearly 11 cents on Thursday to $6.209. That’s 84 cents per gallon higher than a month ago. The surge is within shouting distance of the all-time high in the San Diego region of $6.435, set on Oct. 5, 2022.
“In light of the price spikes, we should not wait until the end of the month to start distributing or to ramp up production of our winter-blend gasoline,” Newsom said in a letter to the Air Resources Board and the California Energy Commission. “Allowing refiners to make an early transition to winter-blend gasoline could quickly increase fuel supply and provide critical liquidity on the spot market, and act as a much-needed safety valve.”
The transition from summer- to winter-blended gasoline is staggered throughout different regions of the state. In Southern California, stations typically make the switch at the end of October, so the waiver accelerates the transition for San Diego stations by about a month.
“The pace of (price) decreases really should accelerate next week and they could continue for several weeks as long as there are no new issues,” such as refinery outages or dramatic changes in gasoline and crude oil markets, De Haan said. “I’m hopeful that by Halloween, a month from today, the average price could be 35 to 75 cents lower.”
During a spike in gas prices that occurred last autumn, Newsom directed the Air Resources Board to issue a similar waiver, which resulted in prices dropping.
Thursday’s announcement came late in the afternoon, after California Republicans in Sacramento sent a letter to Newsom, urging him to call a special session of the Legislature and suspend the state’s excise tax on gasoline.
“Gas prices are once again soaring, and Californians are paying $2 more per gallon than the rest of the country,” the letter signed by each GOP lawmaker said. “Drivers are spending more than $100 each month just on gas. This elevated energy cost cuts into family’s already strained budgets.”
The excise tax on gasoline in California comes to 57.9 cents per gallon. Counting the federal excise tax of 18.4 cents per gallon, California has the highest gas tax rate in the country, according to the Tax Foundation.
The high price of gas has become a hot political topic in California in the past year.
Newsom has singled out oil companies and petroleum refiners, accusing them of “ripping off” customers. The Legislature in Sacramento, controlled by Democrats, ed Senate Bill X1-2 earlier this year that Newsom signed into law.
In effect since June 26, SB X1-2 requires the oil industry in California to produce much more data about imports, maintenance schedules and refinery profit margins.
It also created the Division of Petroleum Market Oversight to monitor the oil and refinery industry. The division has been granted subpoena power and the ability to penalize oil companies if they exceed a “maximum gross refining margin” that will be set by the Energy Commission.
Newsom in his letter directed the oversight division to give him “initial proposals for reforming the spot market in California” by Jan. 1 to “protect Californians from the market-distorting behavior between refiners and traders that the current structure of that market may allow.”
But Newsom’s critics say California’s high gas prices are largely due to the state’s own policies that hinder oil and petroleum development.
For decades, no major oil refineries have been built and the number of existing refineries in California has fallen from 17 in 2015 to 13 as of 2022.
“California is an energy island with isolated resources which makes our state reliant on foreign imports if more domestic production is not allowed,” said Republicans in their letter to Newsom.
In 2022, 59 percent of oil supply sources to the state’s refineries came from foreign imports, according to California Energy Commission data.
This summer, the price of Brent crude — the international benchmark in the futures market — has jumped from $71 in June to more than $90 after cuts in production by the Organization of the Petroleum Exporting Countries and a coalition of other nations that make up what’s called OPEC+.
Fuel analysts also blamed the recent price spike on multiple scheduled and unscheduled maintenance issues at California refineries.
