The Organization of the Petroleum Exporting Countries (OPEC+), a group of 13 countries that control nearly half of the world’s oil supply, cut global oil production by 2 million barrels a day on Wednesday, prompting concern that already high gas prices would soon increase again.
Despite the move, California could start to see a glimmer of relief at the pumps.
Analysts say Governor Gavin Newsom's decision to let California oil refineries switch to the cheaper winter blend earlier than usual means gas prices could start coming down in a matter of days.
CapRadio’s Steve Milne spoke with tracking firm Gas Buddy’s Patrick De Haan about fuel price outlook.
This interview has been edited for clarity and length.
On declining gas prices
We are starting to see some of these apocalyptic numbers come down. It will take stations a few days to start getting access to this cheaper fuel but there may be some light at the end of the tunnel.
The surge in prices is being blamed on production capacity problems at California refineries. Is that your understanding as well, or is there something else going on?
No, that's really it. It's kind of understated — probably the highest amount of refinery issues that I've seen concurrently in the West Coast, or really any region for that matter. We're seeing about five refineries, at latest count, either down for normal routine maintenance or down unexpectedly.
It's a combination of all of those refinery outages that have crimped the ability to produce as much gasoline as motorists need, and that has pushed gasoline inventories in the West Coast down to its lowest level in a decade.
Although Hurricane Ian hit the other side of the country and had horrible impacts on people in southwest Florida, is there any chance we could see even less gas supplies in California?
Although there were some concerns that initially Hurricane Ian could impact the oil and refinery industries in the Gulf Coast, none of that materialized as Hurricane Ian stayed away from the Gulf Coast. So there will likely be no impact on gas prices.
Governor Gavin Newsom has directed the state's Air Resources Board to let oil refineries make the switch to the cheaper winter blend gas earlier than usual. The conversion typically happens in November. How much do you think that will help bring prices at the pump down and when do you think we'll see the price cut?
Well it certainly [is] part of the reason why wholesale gas prices are likely starting to fracture. It's because of the ability now for refineries to have a wider pool of blending components. I think that is certainly a crucial factor in why we are starting to see the numbers move down, is because the governor has temporarily waived the stringent [California Air Resource Board] mandates.
How soon could we see the relief? Well, we could see it potentially going into the weekend — as stations are pulling up lower-priced fuel, they will likely start decreasing prices, but that's something that could take five to seven days to start materializing.
Newsom also wants to create a windfall profits tax on oil companies. He says that would "ensure excess oil profits go back to help millions of Californians who are getting ripped off.” Is that realistic?
I think that's a political stunt and unfortunately that is something in the long term that could hurt California motorists.
Oil companies, if their profits are being basically taken away for redistribution, they're going to be less likely to increase refining capacity, they're less likely to invest in increase in capacity and that's ultimately going to hurt Californians down the road.
The OPEC+ alliance has announced a 2 million barrels a day cut in global oil production. What does that mean?
It's very complicated because of the refinery issues that are causing prices to go up. So I'll say specifically to California — the California refinery issues and the fact that they are now improving is going to offset the rise in price because of OPEC.
So I’ll say it this way — California prices will fall because of the significant improvements in the refining situation but they won't fall as far as they might have otherwise because OPEC is cutting production and that's causing oil prices to go up.
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