California gasoline prices are dropping largely because the price of crude oil is on the decline.
And the factors driving this relief may continue through the end of the year, according to industry analysts.
Prices at the pump fall almost every November in California when refineries make the switch from summer grade to winter grade gasoline. The latter is cheaper to produce. But that adjustment usually accounts for no more than a 20 cent per gallon drop in gasoline prices.
This year, the price of a gallon of gas in California has fallen a whole dollar per gallon since April.
FOX40 found prices as low at $2.77 in Sacramento Monday night.
“Supply is plentiful,” said Gordon Schremp, senior fuel specialist at the California Energy Commission. “All refineries are operating normally.”
In a Monday evening conversation with FOX40, Schremp said the price drop is largely driven by a recent increase in oil drilling here in the United States. This has created an excess supply of crude oil on the world market.
“And as a consequence, refineries in the United States have not had to import as much crude oil,” Schremp explained. “So those countries that were selling to the United States are no longer. They’re having to shop around for additional customers. And when they do that, they have to drop their price.”
Another factor: China’s economic growth is slowing, reducing it’s demand for crude oil, according Schremp. Because China is a major player in the consumption of oil, reduced demand there helps drive crude oil prices down on the world market.
How long will the price relief last? Schremp said the demand for heating oil is one factor that will likely drive prices up as cold weather grips the Northern Hemisphere. Conflict in Iraq could have an effect, as could a rise in the cost of drilling in the US.
But none of those factors will have an immediate effect.
“Because there’s so much crude oil available now, the thinking is the prices will remain rather moderate, and maybe even ease a bit more between now and the end of the year.” Schremp concluded.