New York (CNN Business) — Gasoline in California hit a record $4.72 a gallon on Wednesdayand experts say the $5-a-gallon hike will likely be the norm within months, if not sooner.
This isn’t just a problem for West Coasters: Some of the factors behind the record prices, particularly those related to the switch to renewable fuels, might affect U.S. gasoline costs domestically in the United States. next years.
The US national average is currently $3.51 per gallon. Prices in California have long been among the highest but have soared in recent years in part due to changes at some West Coast refineries. Facilities have been closed in some cases, while others are being converted to refine renewable fuels such as diesel made from vegetable oil.
“California is the poster child for what’s going to happen with the energy transition,” said Tom Kloza, global head of energy analysis at the Oil Price Information Service, the firm that tracks gas data for AAA. “Several refineries have closed permanently… Moving people away from fossil fuels might be the right thing to do, but it’s not without pain.”
So that’s one factor: With less refining capacity, the West Coast’s previous daily production of 2.5 million barrels before the pandemic has plummeted by almost a quarter.
Kloza thinks the $5-a-gallon cost might hit California sometime in the second quarter, and maybe sooner if the Russian invasion of Ukraine, a major oil producer, comes to pass. Other western states are also feeling the price rise, including Hawaii, the only state averaging more than $4 to $4.49 a gallon, as well as Washington, Oregon, and Nevada, where prices are hovering around the U.S. $3.90.
Switching to renewables affects prices in another way: higher taxes
California state gasoline taxes and fees are regarding 68 cents per gallon, compared to a national average of 39 cents, according to the American Petroleum Institute.
California also imposes carbon taxes and fees of regarding $1.35 per wholesale gallon of gasoline, a cost that is passed on to consumers, Kloza said.
“Most states don’t have those fees. [mayoristas]. But it’s a future draw for a number of blue states,” Kloza said. “If you want to get people off fossil fuels, you need to start charging for carbon.”
Meanwhile, California’s new record isn’t just the highest price in that state, it’s the highest of any state.
The next highest record price was $4.70 a gallon in Alaska, but that high was set in July 2008 when a surge in oil prices resulted in the record national average of $4.11 a gallon.
Although the US national average of $3.51 per gallon is much lower than California’s $4.72, the national price is actually rising faster in percentage terms. Gasoline prices are up 6% nationwide in the last month alone and are up 40% over the last year. By comparison, California is up just 2% for the month and 35% for the year.