Four-dollar-a-gallon gasoline is back.
Following on months of steady increases, the average price for a gallon of regular in the San Diego area hit the $4 threshold Saturday, according to GasBuddy.com, a tech company that helps drivers find the cheapest places to fill up. It marks the first time gas has hit $4 since October 2019.
Fuel analysts say the biggest single reason for the rise is tied to the reopening of the economy as COVID-19 restrictions ease and more people receive vaccinations.
“It’s obviously a pinch-point that we were hoping we wouldn’t see, but it’s a sign that the economy is mending,” said Patrick DeHaan, GasBuddy’s head of petroleum analysis. “Americans are getting out and about, they are driving more often than they have in at least a year.”
As of 1:30 p.m. Saturday, the average price in San Diego sat at exactly $4 per gallon, up 3.1 cents from one week ago and 8.2 cents higher than the same time last month.
That’s a far cry from one year ago when the average price had fallen to $2.83 per gallon, following stay-at-home orders put into place by Gov. Gavin Newsom that led to a dramatic drop in gasoline consumption after millions of Californians stopped commuting to work or school.
The rise in price, though painful at the pump, DeHaan said, “is a sign that some things are returning to normal. Demand is up and supply is starting to move in that direction but not as fast.”
Statewide, the average price for a gallon of regular sat at $3.98 on Saturday. That’s the highest of any state in the nation, with Hawaii coming in second at $3.70, according to GasBuddy.
The average price in the U.S. Saturday was $2.86 per gallon, up more than a dollar from this time last year.
Whether prices will keep rising or see a dip, DeHaan said, largely hinges on the virus — not factors normally associated with the fuel industry.
“My bet would be that we will be spending more (at the pump) over the next couple months,” DeHaan said. “But if COVID cases start to surge and states start to lock things back down, then that could have a major effect on demand and price.”
Another reason for some of the more recent rises in prices is due to California gas stations making their annual switch from winter- to summer-blended fuel, which can typically add anywhere from 5 to 12 cents per gallon. Summer grades cost more because of the oxygenates required in the fuel, and refineries have to briefly shut down before processing it.
On the positive side, the pace of the upward trajectory in prices has slowed in the past couple weeks.
Gas prices are directly tied to oil, and production in the U.S. has picked up steadily, if somewhat slowly. “Oil companies are kind of cautiously optimistic about increasing production, and a lot of them had to make some pretty significant layoffs last year, just to remain solvent,” DeHaan said.
Plus, the Organization of Petroleum Exporting Countries, or OPEC, announced it will increase production by 2 million barrels per day from May to July, an indication that the cartel may open the spigot more if the world economy continues to rebound. About half of crude oil supplied to California refineries comes from foreign sources, and Saudi Arabia, the dominant member of OPEC, accounts for 25.6 percent of that.
Upon taking office, President Joe Biden revoked the cross-border permit for the Keystone XL pipeline that was poised to send about 800,000 barrels of oil a day from Canada to the Texas Gulf Coast and issued a 60-day suspension on new drilling permits and leases on federal land. But DeHaan said it’s too early for those actions to affect the recent surge in gas prices.
At its pre-pandemic peak, U.S. oil production was at 13.4 million barrels a day. It’s now at just over 11 million barrels a day.
“President Biden may make it more difficult to grow beyond what we used to produce,” DeHaan said. “But there’s no move the administration has made that prevents oil companies from getting back to those previous levels … There’s ample pipeline capacity.”
Average price of a gallon of regular gasoline in San Diego area:
Nov. 1: $3.14
Dec. 1: $3.12
Jan. 1: $3.20
Feb. 1: $3.41
March 1: $3.73
April 1: $3.96
April 17: $4.00
Source: GasBuddy
