California, which is already paying record prices for fuel, is poised to pay even more as the Golden State is more exposed to soaring oil prices than the rest of the country following the Russian invasion of Ukraine.
Diesel prices at the pump hit a record $5.185 a gallon Thursday, according to the AAA auto club. Gasoline in the state also hit a new record of $4.94 a gallon while prices in San Francisco topped $5, AAA said.
Brent crude futures have jumped about 20 percent since the war in Ukraine began, signaling that retail fuel prices could rise further. Meanwhile, high fuel prices continue to drive inflation gains that have become a liability for the Biden administration.
Although Russia accounts for only a small percentage of California’s crude oil supply, companies like Marathon Petroleum, Chevron Corp. and Valero Energy Corp. will have to find alternatives as most U.S. refiners have turned away from Russian oil. That means the state, along with the rest of the West Coast, will likely increase its reliance on Alaska’s ANS crude, which climbed to $116 a barrel Thursday, as Asian refiners may also compete to replace lost Russian supplies.
California is geographically isolated from most U.S. oil production east of the Rockies. Inland waterborne supplies are limited by laws that require expensive U.S.-flagged vessels to be transported, often through the Panama Canal. As a result, West Coast refiners have been among the largest recipients of Russian oil in the United States for more than a decade.
In addition, California state regulators require cleaner-burning, boutique-quality gasoline and diesel that does not blend easily and that few out-of-state refiners can make. Fuel manufacturers in the state must also acquire costly credits to offset carbon-intensive fuels such as gasoline and diesel, in addition to complying with federal biofuel mandates. All of these elements increase the cost at the pump.
West Coast gasoline inventories are at a 13-year seasonal low at 34.4 million barrels, according to Energy Information Administration data. Local fuel production in California is expected to decline further as more refineries convert to smaller renewable fuel facilities.
According to Marie Montgomery of the Automobile Club of Southern California, high prices at the pump may not prevent drivers from changing their road trip plans during spring break. “But $5 a gallon will be a red flag” for many drivers, she said.