California gas prices could drop below $4 a gallon, experts say. Here’s when it’s likely
Gasoline prices in California appear headed under $4 a gallon, probably by the end of the month.
“$3.99 is absolutely in the cards right now,” said Patrick De Haan, head of petroleum analysis at GasBuddy, which tracks prices. “There’s not much that can get in the way of this locomotive of falling prices in California.”
Business economic expert Gokce Soydemir agreed.
“The expectation is for the prices to fall to the three dollar range by the end of this month, and at the latest mid January,” said the Foster Farms endowed professor of business economics at California State University, Stanislaus.
The declining prices mirror a broader trend. Consumer prices have gone up 7.1% in the year ending in November, the federal Bureau of Labor Statistics reported Tuesday. That’s the smallest annualized increase recorded this year, a sign that inflation has eased.
Nationally, gasoline prices dropped 0.2% during November, though remained 10.2% above levels of a year ago.
De Haan suggested that if things break favorably, gasoline prices in California could even be in the $3.50 range by early next year.
The average price of a gallon of regular gasoline in California Monday is $4.53, according to AAA. That’s down from $5.45 a month ago and the peak of $6.44 in June.
A lot of things have gone right recently to drive down prices. Refineries that had been shut down are producing again. The price of crude oil has been down, roughly $70 to $75 a barrel recently, far below its peak of around $120 a barrel in March.
The slowing American economy is also a factor, and could continue to be.
“There is also greater expectation of a recession now and during recessions oil prices fall,” Soydemir said.
Gov. Gavin Newsom deserves some credit, De Haan said. Newsom in October directed the California Air Resources Board to “take whatever steps are necessary” for refineries to start producing gasoline’s winter blend, which is easier to make and less expensive at the pump.
“What he did made sense, it brought relief. His action to waive those stringent requirements helped release supply,” De Haan said.
The federal Energy Information Administration estimated that in October, refining accounted for about 22% of the cost of a gallon of gasoline. Oil accounted for 54% of the price. The rest was for marketing, distribution and taxes.
A warning, though: Oil prices are impacted by many factors that are often impossible to predict. Notably, China’s COVID-triggered lockdown depressed demand, and if the country swings wide open again, demand and therefore prices could increase.
“We know China is a major contributor to demand, said Sanjay Varsney, professor of finance at California State University, Sacramento.
If China reopens, it’s logical that “you’d see supply and demand equation change,” which could send prices back up, he said.
But the other factors involved in the price drops are likely to mean what De Haan called a “soft landing” for prices.
This story was originally published December 12, 2022 at 12:32 PM with the headline "California gas prices could drop below $4 a gallon, experts say. Here’s when it’s likely."
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