Gasoline prices are climbing across California, with experts cautioning that the current surge could be distinct from past increases. Drivers in Los Angeles County have seen prices rise for ten consecutive days, reaching an average of $5.645 per gallon for regular self-serve gasoline as of Friday. This represents a 24-cent jump over the past ten days and a $1.165 increase compared to prices one year ago.
The statewide average in California has reached $5.59 per gallon, 17 cents higher than the previous week, making it the highest in the nation. The average price in San Francisco is $5.76 per gallon, while Oakland is at $5.58 and San Jose is at $5.57.
The current spike is occurring as the global fuel market faces significant pressure. U.S. refineries are operating at 96% of capacity, with facilities in the Midwest and Rocky Mountain regions at full operational capacity, according to the U.S. Energy Information Administration. This leaves little room to absorb further supply disruptions.
Global conflicts are contributing to the squeeze. Renewed fighting has disrupted traffic through the Strait of Hormuz, a critical shipping route that previously handled approximately one-fifth of the world's oil supplies. Houthi rebels have also threatened a Red Sea route vital for Saudi Arabian crude exports. Additionally, Ukrainian drone strikes have reduced Russia's refining capacity, and Moscow has imposed a ban on diesel exports, further tightening global fuel availability.
The strain on the market has caused U.S. wholesale diesel futures to rise 26% this month. Refiners are experiencing record-high profit margins for converting crude oil into gasoline and diesel. Energy market analysts expressed concern that the system has limited capacity to react to additional escalations or disruptions.
Adding to the precarious situation, the United States has depleted a significant portion of its Strategic Petroleum Reserve. Approximately 77% of the 172 million barrels pledged for release in March have been drawn down. The reserve, currently holding 311 million barrels, is at its lowest level since 1983. Industry analysts estimate that operational minimums for the reserve are between 180 million and 200 million barrels, below which withdrawals could potentially harm infrastructure and disrupt pipeline operations.
Commercial oil inventories in Cushing, Oklahoma, the nation's largest oil storage hub, have also remained near operational minimums, hovering around 20 million barrels since late June. This low level of stored crude oil limits the flexibility to respond to market shocks.
California drivers face an additional burden due to the state's existing "California premium" on gasoline prices, which is attributed to state taxes and environmental regulations. This premium typically keeps pump prices more than $1.50 per gallon above the national average, meaning any new market pressures disproportionately affect motorists in the state.