How are gasoline prices determined?
In recent weeks, it’s been a question that’s top of mind for many California drivers, and the record high prices are still climbing.
“As of today, drivers in San Luis Obispo are paying $5.72 on average,” said Doug Shupe, Spokesperson for the Automobile Club of Southern California. “Now that price is 12 cents higher than yesterday and 68 cents higher than a week ago, 85 cents higher than a month ago and it's $1.82 higher per gallon than this time a year ago.”
To put that into perspective, a person driving a mid-sized sedan with a 14-gallon fuel tank is paying about $25 more to fill up their tank compared to one year ago.
“The primary reason why we're seeing these pump prices moving higher each day is because of the ongoing situation between Russia and Ukraine,” Shupe explained. “That is putting upward pressure on the crude oil prices.”
Cal Poly Economics Lecturer Dr. Dan Seiver echoed that.
“The price of crude oil has shot up to about $125, $130 a barrel because of Ukraine. In particular, that's most of the cost,” Dr. Seiver said.
The increase in demand is also playing a role in rising prices.
Here’s the latest breakdown of the estimated price of gasoline from the California Energy Commission:
You can see that crude oil costs are the highest. Then there are several taxes tacked on.
On Tuesday, California Governor Gavin Newsom proposed a tax rebate during his State of the State address.
“In January, we proposed a pause to the gas tax. Now it's clear we have to go farther and that's why we're working with legislative leadership. I'll be submitting a proposal to put money back in the pockets of Californians to address rising gas prices,” Governor Newsom said.
“It could provide temporary relief but it could be overwhelmed if the price of crude goes up enough. The price of gasoline will go up more than the amount of the California gas tax,” Dr. Seiver said.
Experts say they don’t see any immediate relief in the near future.
“The latest bump in crude oil prices probably hasn't been fully reflected in gas prices so the next few weeks it wouldn't be surprising to see them shooting up even more,” Dr. Seiver concluded.
AAA recommends these tips to conserve fuel:
- Have properly inflated tires
- Lighten the load of your vehicle
- Reduce your speed on the highway by 5 to 10 miles/hour to increase fuel efficiency up to 14%
- Shop around for the cheapest gas prices
- Park in the shade so your AC doesn't work as hard to cool it off
- Combine all your errands into fewer trips per day