California gas prices should drop soon, analyst says


California gasoline prices may soon head down to the $3.50-to-$3.75-a-gallon range, according to a leading forecaster of gas costs.

“The rest of the country may see brief paroxysms of price rises over the next couple of weeks, but California should be headed sharply lower, and soon,” said Tom Kloza, chief oil analyst for the Oil Price Information Service.

Retail gasoline prices in California had already declined in the last few days. The state’s average fell to $4.253 a gallon Thursday, down 2 cents in the last week, according to the AAA Daily Fuel Gauge Report, which uses data from service stations.


The primary reason was oil prices — crude futures settled at $98.97 a barrel Thursday, down about $15 from highs reached last month.

Gasoline prices were up for the country as a whole, however. The national average reached $3.984 a gallon Thursday, up 2.2 cents in the last week.

This was partly because horrific weather affected refineries elsewhere in the country. Deadly tornadoes in the South caused power outages that shut down some refineries, and near-record flooding along the Mississippi River could cause additional shutdowns.

California’s oil comes from inside the state, Alaska and foreign countries. This is normally a liability because the state can’t get cheaper oil from other parts of the U.S., but in this case it shelters California from problems caused by the refinery shutdowns.

Other states probably can expect lower prices down the line, said Phil Flynn, an analyst at PFGBest Research.

“California prices were the first to peak around the nation and so prices there will be the first to drop,” he said. “I think that prices will drop nationally as well, as long as the Mississippi doesn’t do a lot of damage to refineries near the gulf.”


Even if prices nationwide do plunge soon, it might not be enough to get people back on the highways for their usual levels of summer driving.

Gas prices above $4 got people thinking about energy policy and about how much they’re paying to operate their cars. That won’t go away soon, even as prices fall, said Joe Hahn, a professor at Pepperdine University’s Graziadio School of Business and Management who focuses on energy-price modeling.

“People are asking, why are we shipping so much of our money overseas to pay for foreign oil?” Hahn said.

“They’re asking, why don’t we have a better energy policy? And when that happens, people drive less, at least to the extent that they can change their habits.”

The Paris-based International Energy Agency forecast on Thursday that fuel demand in North America would be 23.7 million barrels a day, down about 190,000 barrels from last year.