Anyone who’s been driving around California lately has noticed that the price of gas has gone up, and I mean really gone up. In the few months, gas pricing has been at the highest they’ve been since 2014. In April, prices rose to $3.79 in the LA area and in other parts of California to nearly $4! So as you were driving around California, taking note of the rising gas pricing you just may have asked what the reason for this increase was? Well, I think that’s an interesting question, and one with an even more interesting answer.
In short, the reason why retail gas pricing has gone up in the state of California is because in the last year, three of California’s oil refineries have shutdown. Two of which, refineries in San Francisco and Los Angeles respectively, shut down in just the last few months. As a result of these shutdowns, the supply of fuel in the state of California has naturally plummeted. But since the demand for fuel has remained very much the same, what results is an increase in the price of fuel. These shutdowns could not have come at a worse time for California drivers either, because the state has just begun its transition to summer gasoline which consequently adds cost to the price of fuel. So needless to say, gas is expensive right now and it’s to remain so until the supply returns to a greater balance with demand.
So now what? Does all of California suffer until those refineries come back online? Kind of. But don’t submit to this fate just yet, there is still something you can do. As we discussed, retail pricing went up when these refineries went down but what we didn’t discuss was how retail pricing works. Simply, retail pricing in not at all related to pricing at the rack or the price refineries sell at. Meaning, that retailers can choose any price they wish regardless of the market. As a result, retail pricing will rise with the market but will also only trickle down after it once it falls. Causing you, the consumer, to overpay for your fuel. Wholesale pricing on the other hand, is a different story. Directly linked with the price at the rack, wholesale (OPIS) pricing rises and falls with the market. So the price you pay, is the price the product costs to produce. No frills, to mark-ups.
So if you, or your company are looking to leave the erratic nature of retail pricing behind consider starting a fuel card program. With a fuel card program you’ll be able to take advantage of the consistency of market-based, wholesale pricing and start saving immediately. Click here to learn more about fuel card programs, and where you can apply to get started!