California Gas Prices Could Rise After OPEC Cut Oil Production: Experts

California Gas Prices Could Rise After OPEC Cut Oil Production: Experts
Pump jacks used for gas and oil extraction are seen over the Monterey Shale formation in Lost Hills, Calif., on March 24, 2014. (David McNew/Getty Images)
Jill McLaughlin
4/6/2023
Updated:
4/9/2023
0:00

Californians should expect to see higher prices again this summer as Middle East oil producers cut production, according to industry experts.

The Organization of Petroleum Exporting Countries (OPEC+) announced April 3 the decision by a handful of countries—including Russia and Saudi Arabia—to cut oil production by about 1.4 million barrels a day starting next month.

Rock Zierman, CEO of California Independent Petroleum Association, told The Epoch Times California’s reliance on imported oil makes its gas prices vulnerable to fluctuations in foreign production.

“For decades, state elected leaders have purposely made California dependent on foreign oil at the expense of our residents and workers. And we continue to pay for this decision every time we go to the pump,” he said.

Other experts also said the state could see an uptick in costs at the pump, but it won’t be as drastic as last summer’s record prices.

Gas prices over $7.00 a gallon are displayed at a Chevron gas station in Menlo Park, Calif., on May 25, 2022. (Justin Sullivan/Getty Images)
Gas prices over $7.00 a gallon are displayed at a Chevron gas station in Menlo Park, Calif., on May 25, 2022. (Justin Sullivan/Getty Images)

The Organization of Petroleum Exporting Countries (OPEC+) announced April 3 the decision by a handful of countries to cut oil production by about 1.4 million barrels a day starting next month.

California gets most of its oil from OPEC+ countries and others. Last year, the state imported nearly 59 percent of its oil from foreign countries, an increase of 13.7 million barrels from the year before. Each barrel holds 42 gallons of oil.

Of the total imported crude of 307 million barrels, about 22 percent came from Iraq, followed by Ecuador (17 percent), and Saudi Arabia (16 percent). Other contributing countries included Brazil (14 percent), Colombia (7 percent), Guyana (6 percent), and Mexico (4.6 percent).

Another 14.3 percent was shipped in from Ghana, Argentina, Angola, Australia, Kuwait, Libya, Peru, Trinidad and Tobago, United Arab Emirates, and the United Kingdom, a spokesman from the California Energy Commission told The Epoch Times.

Representatives of OPEC member countries attend a press conference after the 45th Meeting of the Joint Ministerial Monitoring Committee and the 33rd OPEC and non-OPEC Ministerial Meeting in Vienna, Austria, on Oct. 5, 2022. (Vladimir Simicek/AFP via Getty Images)
Representatives of OPEC member countries attend a press conference after the 45th Meeting of the Joint Ministerial Monitoring Committee and the 33rd OPEC and non-OPEC Ministerial Meeting in Vienna, Austria, on Oct. 5, 2022. (Vladimir Simicek/AFP via Getty Images)

Although the cuts won’t occur until next month, California’s gas prices have been rising again recently. The average price was $4.85 April 6, slightly higher than the previous week’s average of $4.83, according to the Automobile Club of Southern California.

“That could impact us and put upward pressure on prices as we move into the months ahead,” the automobile club’s spokesman Doug Shupe told The Epoch Times.

Last year at this time, Californians were paying more than a dollar more for a gallon when it reached an average of $5.96 in the state, according to Shupe.

“If there’s any good news, we’re much lower than a year ago,” he said.

Oil cuts in the Middle East may have a more noticeable impact on the state “to a slight degree,” but gas prices throughout the U.S. will also be affected, Patrick De Haan, head of petroleum analysis at Gas Buddy, told The Epoch Times.

However, De Haan doesn’t think California will reach new price records this year. Last year’s record highs were attributed to unplanned maintenance at the state’s refineries and the war in Ukraine.

Gas prices will probably peak sometime in mid-May to mid-June and then improve after that, he said.

To cut down on costs, AAA is encouraging drivers to download the company’s app to help find the cheapest gas prices. They also gave tips to maximize fuel efficiency by removing excess weight from vehicles and obeying speed limits.

Gas stations serve customers at peak prices in Irvine, Calif., on Feb. 23, 2022. (John Fredricks/The Epoch Times)
Gas stations serve customers at peak prices in Irvine, Calif., on Feb. 23, 2022. (John Fredricks/The Epoch Times)

California drivers pay some of the highest prices for gas in the nation, partly because of the state’s high gas taxes and climate action programs.

For each gallon, consumers pay 84 cents in state and federal taxes, plus another 35 cents for the state’s environmental cap-and-trade program to lower greenhouse gas emissions—about 7 cents more than last year’s charge.

During the warmer summer months, the state also switches to a summer blend that produces less emission but is costlier.

Another yet unknown additional cost this year for the oil industry is Gov. Gavin Newsom’s recently passed windfall profits penalty law, which will take effect in about three months.  The law authorizes the state Energy Commission to impose penalties on oil companies for exceeding a certain profit margin. The governor claims it will end the state’s high gas prices.

Michael Mische, a management and oil industry expert at the University of Southern California, disagrees.

“This does not solve the gasoline crisis in California,” Mische said. “There is nothing to suggest this will relieve price pressure whatsoever, other than creating more regulatory processes and powers, which will probably be tested in court.”

He said analysts have yet to see details about the new regulations, so they can’t really say how much more consumers could pay, but at the least, added administrative costs are expected to increase fuel prices.

“Forget about any relief at the gas pump,” Mische said. “That’s not going to happen.”

Jill McLaughlin is an award-winning journalist covering politics, environment, and statewide issues. She has been a reporter and editor for newspapers in Oregon, Nevada, and New Mexico. Jill was born in Yosemite National Park and enjoys the majestic outdoors, traveling, golfing, and hiking.
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