Calif. gas prices could spike even higher after India slashes exports

Gas prices in California are soaring past $6 a gallon, and a new supply threat could send them even higher, experts warn. 

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The war involving Iran has rattled global oil markets, especially after disruptions in the Strait of Hormuz, the narrow shipping route that carries roughly 20% of the world’s oil supply. The fallout has already pushed California gas prices higher for months, worsening the burden for drivers in one of the nation’s most expensive fuel markets.

California has a problem “boiling in the background” because refiners in India are cutting back production of alkylate, Patrick De Haan, the head of petroleum analysis at GasBuddy, told SFGATE. The chemical is a key blending component in the state’s gasoline blend.

He said California has become “more reliant” on overseas production of alkylate.

“The problem is some refiners in India are scaling back production of alkylate to maintain supplies of natural gas liquids and that is negatively going to impact production,” De Haan said. “California in the weeks ahead could face some challenges finding enough alkylate to blend into its gasoline unless the state waives the carb requirements here sometime soon.”

California has some of the nation’s strictest fuel requirements, and without alkylate, the state can’t produce its clean fuel, according to the American Fuel & Petrochemical Manufacturers.

De Haan described the chemical as a “high octane component of gasoline that burns cleaner” and “can withstand warmer temperatures and has lower emissions.”

The shortage is not yet having a major effect on California gas prices, but if current conditions persist over the next three to five weeks, prices could climb to a “fairly high level,” he said. If the situation worsens, De Haan said California Gov. Gavin Newsom may have to consider issuing a waiver for the state’s gasoline requirements, he added.

The California Energy Commission told Reuters that officials aren’t currently expecting a shortage but they are monitoring the situation. The commission did not respond to SFGATE’s request for comment. 

Ross Allen, a spokesperson for Chevron, told SFGATE that it cannot comment directly on inventory levels of specific raw materials, but it’s closely monitoring the citation and continuing to run its two refineries in California. 

“Chevron continues to watch energy markets and is closely monitoring supplies of gasoline and blending components,” Allen said. “… The crisis at the Strait of Hormuz has exposed how dangerous the state’s policies have been and we urge the state to protect its remaining refining capacity by cutting red tape and reducing taxes and fees.”

Other energy companies with refineries in California, including Marathon Petroleum Corporation and PBF Energy, did not respond to SFGATE’s multiple requests for comment.

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The good news though, is that oil prices started dropping from serious highs, as of Wednesday, of just over $100 per barrel. 

Part of the reason could be because U.S. President Donald Trump has hinted at negotiations with Iran this week, De Haan said. California could see some small relief in gas prices, but if a deal doesn’t happen by next Tuesday, prices are expected to shoot right back up, he added. 

“We’ve been down this road several times before,” he said. “… There might be some very short-term decreases here, they may not start until the weekend.”

As of Wednesday afternoon, the average price for regular gas in California is $6.15 per gallon, a huge jump from the $5.84 average a month ago and $4.90 a year ago at this time, according to the American Automobile Association. 

Some areas of the state are also nearing record prices, such as San Francisco. The average price is $6.36 per gallon in the city, just shy of the state’s highest average price of $6.44 per gallon on June 14, 2022. The state already surpassed its record for diesel on April 9, hitting $7.75 per gallon.  

All the other Bay Area counties are also averaging over $6 per gallon, with $6.22 in Alameda, $6.16 in Santa Clara, $6.12 in Solano, $6.32 in San Mateo and Sonoma, $6.24 in Contra Costa, $6.33 in Marin and $6.40 in Napa, according to AAA. 

Some of the cheapest gas prices are currently in Northern California. 

Prices are averaging $5.94 per gallon in Shasta County, $5.85 in Tehama County, $5.94 in Butte County, $5.85 in Yuba County and $5.90 in Sutter County. Farther south, there are only a few hot spots where gas is slightly cheaper, like Kings County, just hitting $6 per gallon, and Imperial County at $5.81 per gallon.