Gas has been cheap enough in the last few years to give the auto industry a boost, depress electric vehicle sales and boost the number of miles we drive. Lower gas prices also mean folks have more cash to spend on other things, like housing.
But prices at the pump hit a two-year high last week, the Auto Club of Southern California said in a recent alert. The Los Angeles-Long Beach average reached $3.19 a gallon — 46 cents higher than this time last year, according to the AAA. With Hurricane Irma reaching Florida, Hurricane Harvey taking out refineries in Texas and a 12-cents-per-gallon increase in the state's excise gas tax, motorists are bracing for a return to painful fuel prices.
Experts say don't be alarmed. The prices will level off and might even decrease in the weeks to come. The Florida hurricane probably won't have much effect on fuel supplies in California. Even the Texas disaster didn't directly impact the Golden State's supply; California relies on 17 operating refineries within the state to produce state-required blends. And wholesale crude prices are heading south.
“The outlook is that price increases should start slowing down in the next week or so,” says Patrick DeHaan, senior petroleum analyst at pump comparison site GasBuddy.com.
But as things stand, Southern California hasn't seen pump prices this high since September 2015, according to the AAA. In a statement, Auto Club spokesman Jeffrey Spring called the spike — experienced from coast to coast — the “worst national gas price spike since Hurricane Katrina in 2005, which pushed the U.S. price average up by about 45 cents a gallon to a high point of $3.06.”
AAA spokeswoman Marie Montgomery explained that while the latest hurricanes won't squeeze California's gas supply, betting on oil futures as Harvey aimed for Texas artificially boosted crude prices. “Supply was not diverted,” she says. “But the anxiety drove futures prices up, and that drove wholesale prices up.”
Now? “Wholesale prices are coming down,” she says. “It looks like we're on a course to hopefully get back to normal in the next few weeks.”
The state's new gas tax hike will kick in Nov. 1, but it could be offset by the Oct. 31 state-mandated switch to winter-blend fuel, formulated to reduce smog in cooler months. Winter blend is less expensive than summer blend, DeHaan says.
One more factor could put more cash in many Angelenos' wallets: Demand for gas traditionally deflates in fall and winter. “Fall and winter months see the lowest demand of the year,” says the AAA's Montgomery. “We expect prices to certainly come down from this temporary situation.”