WTF Just Happened to Gas Prices?

What just happened to gas prices in Los Angeles? Your state government is what happened.

The 12-cent gas tax intended for repairing and maintaining California's worst-in-the-nation roads kicked in on Wednesday. Supporters of the tax hoped that it would be offset by the annual, government-mandated switch to cheaper "winter blend" gas. While that might have had some mitigating effect, motorists were hit with a double whammy as wholesale oil prices around the world went up just as the tax hit.

The result for Los Angeles County has been a whopping 21-cent increase in average pump prices since this time last week, according to the Auto Club of Southern California. The average price per gallon in the county was $3.28 on Monday, says local AAA spokeswoman Marie Montgomery.

The spike was the largest consumers have faced in 2017, she says. The last time fuel prices were this high was in September 2015, she added. "It was a perfect storm of the prices going up at the same time as the gas going up," Montgomery says.

Last week GasBuddy.com head of petroleum analysis Patrick DeHaan predicted the steep increase in prices at a time when others believed it wouldn't be so bad. GasBuddy pegs this week's average L.A. pump price at 20.3 cents per gallon above what folks were paying last week. It also posts a per-gallon area average of $3.28.

WTF Just Happened to Gas Prices?
File photo by Vincent Lock/Flickr

DeHaan says production was already being purposely squeezed by the Organization of the Petroleum Exporting Countries (OPEC) in order to boost prices. But then turmoil hit Saudi Arabia over the weekend, with crown prince Mohammed bin Salman removing members of his own family from powerful posts. The upheaval was boosted by tensions between Saudi Arabia and Iran.

This all has oil investors skittish, DeHaah says, and that could provide inspiration for further price increases at the pump in the following week. "Wholesale dramatically increased," he says. "That looks like it's tied to supply concerns throughout the U.S."

Some Great Lakes states also were seeing price spikes similar to California's, the AAA's Montgomery says. Those, however, were tied more to localized factors, including refinery maintenance that has constricted supply there.

California's monthly average prices
California's monthly average prices
GasBuddy.com

California's gas tax, meanwhile, is being roundly criticized by conservatives such as Jon Coupal, president of the Howard Jarvis Taxpayers Association, which is backing a proposed voter initiative that would repeal the tax. In an op-ed piece published by the Orange County Register over the weekend, Coupal and co-author Jim Patterson, a Republican assemblyman from Fresno, argued that it was just too much to bear for the average Golden State resident.

"The cost of living in California is way above the national average and most of that higher cost is the result of foolish tax and regulatory policies," according to the piece. "Moreover, higher taxes and out-of-control spending haven’t improved our level of public services."

If DeHaan is right again, it doesn't look like motorists will see much relief anytime soon. He believes a wholesale-driven boost of as much as 10 cents per gallon was possible within the next week. And he notes that when summer blend kicks in next spring, we'll be look at another big hike — perhaps as much as 20 cents per gallon.

If there's any schadenfreude to be had here, it's that "the rest of the nation will continue an upward trend, too," he says.

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