Gas Price Tops $4 In California For First Time Since July 2014

After oil prices eclipsed $70 a barrel last week for the first time since the summer of 2014 - when oil prices suddenly plunged as the dollar strengthened and shale producers tried to pump their way to market dominance - we knew it was just a matter of time before gas prices reached another troubling milestone (for consumers at least).

And now they have. Because, as the Fresno Bee reports, gasoline prices in Fresno, Calif. have blown past $4/gallon this week as prices in California reached their highest level since 2014.


Meanwhile, the national average has climbed to $2.81 from $2.34. Gas in Fresno typically costs $1 above the national average, thanks largely to the Golden State's high taxes and demanding standards for reformulating gasoline. 

What's worse, it's likely they'll rise further as $70 a barrel feeds through to gasoline at the pump - a process that typically takes a few weeks. Though In California, which has the fifth highest gas tax in the country, prices are typically much higher. In addition to the taxes, the state has the strictest emissions laws in the country, which requires consumers to use a particular type of gasoline that only a few refineries produce.


While higher gas prices will benefit oil companies and their shareholders, virtually everybody else will face cutbacks to their discretionary spending that could more than erase the benefits from the Trump tax cuts, as we pointed out last month. And with the personal savings rate already near all-time lows, this could curb consumption, to the detriment of the broader economy.

But don't take our word for it.

According to the Urban-Brookings Tax Policy Center, Americans will spend an average $400 per household more on fuel this year than in 2016. By contrast, middle-income US households will on average gain $930 from the tax cut bill.

But since the distribution of the middle class is non-homogenous, lower income households will see a disproportionately severe impact from rising gas prices, as the table form Deutsche Bank shows. They'll also see less of a benefit from the tax cuts.


Another way of visualizing how the composition of spending by US consumers will be impacted is shown in the chart below, which lays out the share of spending on gas as a portion of the total household budget.

Chart Two

And with 200-500kb/d of Iranian crude about to exit the market (by UBS's estimation), many expect oil prices to continue rising.

Hence, the scramble by banks' commodity strategists to raise their oil calls high enough to nod at the trend - but not so high that it spooks their clients.

Bank of America became the first Wall Street bank to call $100/bbl for Brent crude (which was trading at $77/bbl on Thursday) in 2019, Bloomberg reported. At that level, prices at the pump would surpass $5 a barrel in California and other high-tax states.

Goldman, meanwhile, sees Brent rising to $82.50 a barrel in the coming months, and says there’s a chance prices could surpass that level - though it sees prices retracing those gains in 2019. But curiously, in Goldman's estimation, the biggest upside risk isn't coming from Iran, but other choke points: Growing geopolitical tension in other key oil producing countries like Saudi Arabia, Venezuela, Libya and Nigeria create risks of additional production losses in the face of depleted inventory.


But while it's unclear how high prices will ultimately rise, the fact remains: Oil's year-to-date runup has already erased roughly half of the benefit from the tax cuts.

Pretty soon, we might see a return of joke signs like the one below:


And what's worse, with oil prices and interest rates rising, consumers are finding themselves in a double-bind as economic forces chip away at their already diminished spending power.


TheWholeYearInn vato poco Thu, 05/10/2018 - 18:31 Permalink

I gotta say it here... (because there may never be another time to)


Dammit! California is BEAUTIFUL (the land)... I lived there for 12 years and tho I also have been to every state in the US, about 10 provinces in Canada, half the states in Mexico, the entire UK, most all of Europe & Scandinavia (including Iceland), Australia, Israel, EVERYWHERE in South America (multiple times to all countries, but mostly Argentina & Brasil), Japan (at least a half dozen times), Africa (most only northern Africa, but ALL of SUB SAHARAN Africa several times), China, SE Asia, Korea, a few MU continent island remnants here & there, and bits & pieces of Russia...


California, Italy (lived there for 12 years as well & know every square inch including the islands), & South Africa rank at the VERY TOP in terms of everything...  (I'd probably say the same about the Greek Islands if I were able to have visited about a dozen more than the dozen I've seen & walked upon)....


It's very sad to me to see what humans have reduced these places to.


The only redeeming point is that (mostly talking SA & California here), it's not an outright ecological disaster yet with regards to the land... It's just the people & governments are fucked up.


& whereby my first two down votes occur from mosley's user accounts because he just got back home after his 30 minute drive, & well, he NEEDS A WIN as much as TRUMP (on any level)...




In reply to by vato poco

vato poco TheWholeYearInn Thu, 05/10/2018 - 21:34 Permalink

I typically downvote the shit outta your posts: you have some ... uh.... unusual political ideas. 

but you're dead on about Cali. I lived in LA in the '90's, and I used to talk to the old-timers. to a man, they all said it was quite literally *paradise*. and they worked hard to make it better: parks, world-class schools, bringing water to the desert, etc. I spent time in the old old books, and it must have been just. frickin. incredible even earlier: imagine Hollywood in the '20's. Santa Barbara. Cambria. Catalina. Or San Diego in the teens. Plenty of room available on Coronado Island: why wouldn't you put your snug little bungalow there? I'd KILL to trade lives with Ted Williams, who grew up there/then. I wouldn't even need the Baseball God part - although groupies do have an allure all their own.

but then word got out. goddammit. 

and now it's a pestilential shithole; north mexico with ghettos and traffic and stupid fuckin idiots all lining up to vote for even MORE destruction. I suppose there's a lesson there - and a warning for the optimists among us.

"call a place a paradise, kiss it goodbye" - the Eagles

In reply to by TheWholeYearInn

cougar_w vato poco Thu, 05/10/2018 - 18:32 Permalink

Californians were never about saving the planet, maybe a few Hollywood types claimed to be, for whatever reason they felt they had to do that. Everyone else here, drives everywhere all the time. You would not believe the number of fat, diabetic tubs of lard that crawl out of their F-150s and Escalades down at the Walmart or Costco. Gas needs to hit somewhere around $20/gal to make any difference with these sad sacks, and I seriously doubt the oil majors will allow that to happen. They have more sense than to make people look at alternatives, not when those people are so perfectly enslaved to fossil fuels.

In reply to by vato poco

TheWholeYearInn cougar_w Thu, 05/10/2018 - 18:41 Permalink

@cougar +1


My 12 years in California ~ People were in love with Unocal 76, Chevron, Getty, et al because it made them rich...


FFS ~ There are oil derricks in the backyards of Beverly Hills High School, while dumb ass twits think the La Brea Tar Pits (which is where the Los Angeles Museum of Natural History is built on the grounds of), is a dedication to Wooly Mammoths).


I can't even remember how many times the environmental oil spill problems that occurred in the channel of the islands off Santa Barbara were swept under the rug...


This comment alone makes me seem like a tree hugger... If anyone reads the BODY of my comments, you'd see that it's not...


I'm just saying that there's probably a BALANCE somewhere (that is never likely to be achieved because of politics).

In reply to by cougar_w

ZD1 Newbie lurker Thu, 05/10/2018 - 18:34 Permalink

Commiefornia's loony leftist Democrat plantation masters want gas prices to shoot to the moon. The shithole state currently has the second highest state gas tax in the US at 53.5 cents / gallon.

By 2019, gas taxes in Commiefornia will be 58.3 cents / gallon: 

47.3 cents in primary and secondary excise taxes
2 cents on the underground storage tank fee
9 cents on the sales tax…

In reply to by Newbie lurker

Aliens-R-Us Thu, 05/10/2018 - 18:14 Permalink

Pray to fucking Allah gas goes to $25/gal.  Don't be surprised when it does.  Someone has to pay for subsidized solar panels and cleaning up homeless shit off the streets.

Gimme a list of the fucking nitwits who live there.  Time to open 'Insane Asylums-R-Us' chain.