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With the summer road-trip season approaching, gas prices across the United States are continuing to hit record highs and in California, the price at the pump soared past $6 a gallon for the first time ever, the American Automobile Association said.
In California, gas was $6.05 a gallon on average as of Wednesday and prices in the Bay Area were even higher, reaching $6.29 a gallon in San Francisco. When will prices go down?
Definitely not before the end of the summer, said Patrick de Haan, head of petroleum analysis at Gas Buddy.
“I really don’t see much that would push prices down over the coming weeks or even months,” de Haan wrote in an email. “I don’t think we’ll see relief until there’s improvement in global supply or a reduction in global demand. Things like a resolution between Ukraine and Russia, or a economic slowdown, all signs are pointing to up, but not so much down. The supply situation won’t improve anytime soon, and with the global economy recovering from the pandemic, I really don’t see demand slowing down much, either.”
Severin Borenstein, an energy economist at UC Berkeley’s Haas School of Business, agreed there’s no indication that a price drop is coming soon, but he did point to one promising forecast.
“The futures market is predicting that oil prices will decline by an amount that would translate to about 50 cents a gallon at the pump by the end of the year,” Borenstein told SFGATE over the phone. “It’s a completely believable prediction, but not certain by any means. The price could drop more than that, or it could go up. I think the one thing people can count on is a lot of volatility.”
The price of crude oil drives the cost of gas. Right now, supply is limited and that means high prices. The supply issues started during the COVID-19 pandemic. Demand for oil plummeted early in the pandemic and then rebounded, but production and supply struggled to keep up. Borenstein said oil companies are having a hard time bringing back workers and getting their equipment back up and running.
More recently, the Russian invasion of Ukraine has had an even more dramatic impact on the price of crude oil as the U.S. and other countries imposed sanctions on Russia, removing millions of barrels from the global supply.
“We don’t know what’s going to happen with Russia,” Borenstein said. “There are a lot of issues facing the world right now a lot greater than gas prices.”
Lawmakers have proposed a number of plans to offset the high price of gas. Gov. Gavin Newsom’s new inflation relief package includes $11.5 billion for tax refunds to address rising gas prices. If the package passes, vehicle owners would receive $400 checks. The refund would be capped at two checks per individual — in other words, if you own three cars, you will receive $800.
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