It’s been a frustrating year for gas prices in Southern California (and California in general). While the rest of the country has been paying well under $3/gallon for gas, we’ve been dealing with prices that are around $4/gallon. Some of the so-called reasons for the price disparity are special gas formulations for California, refinery capacity issues, and shortage of raw materials for making California’s special gas.
Either way, it seemed like a good time to update my gas price vs oil price analysis to see if the current price of gas made sense given the drop in oil prices over the last year. Last summer, oil prices were around $100/barrel, and gas prices were around $3.60 – $3.70. This summer, oil prices have been hovering around $50/barrel. In year’s past, when oil has been this price, gas prices have been in the $2.20 – $2.30 range. How does this year compare?
Over the period of time from January 2015 – May 2015, the refinery acquisition cost of oil ranged from $47 – $59. The price of gas during this time ranged from $2.12 – $2.72. While this year’s gas price range is about $0.20 – $0.30 higher than in year’s past, it’s not a huge difference. In other words, the price for most of the country is in line with what you’d expect when oil prices are around $50. However, here in California, something is definitely amiss. Prices are over $1 higher than the national average, and definitely much higher than the last time oil was at this price level. In fact, I wouldn’t be surprised if the average price in California is driving the $0.20 – $0.30 difference in the current price of gas vs oil.
Hopefully, relief is in sight. They keep saying that prices will come down once refinery capacity is brought back online and as typical supply and demand concepts take hold. In other words, if refiners can make more money by producing gas for California, it should create an increase in supplies which in turn should drive down prices.
I just hope that it happens soon. It would be great to take advantage of these low gas prices before the price of oil goes up again.
All of the data used to generate the above graph can be obtained from the U.S Energy Information Administration website. If you’d like to do your own comparison analysis, I used this data for gas prices, and this data for oil prices.