Driver pain, economy gain: California gas prices at pandemic high

Driver’s pain at the pump may be a sign of an economy regaining steam: California gasoline prices hit their highest since the pandemic first clobbered the business climate in March.

One gasoline benchmark — the U.S. Energy Information Administration’s average price for regular, reformulated blend — rose to $3.27 for California this week, the highest it’s been since March 9, 2020. The price has risen in all but seven weeks since it hit bottom at $2.64 on May 4, 2020, after lockdowns hit the economy. The last time gas had been cheaper? The spring of 2016.

Remember, tumbling gasoline prices last year was bad economic news. Business restrictions designed to limit the spread of coronavirus dramatically reduced travel by ground, air and sea, which slashed demand for fuel.

The unprecedented economic upheaval pushed pump prices down 21% in less than two months. During that tumultuous period, commodity market quirks pushed the futures price of the main gasoline ingredient — crude oil — briefly below zero.

Since spring, much of the economy has slowly returned to a relatively “normal” pace and energy prices reversed. As a result, pump prices statewide are up 24% from the May low.

Californians are getting out more, which can be seen as an economic plus. Just 27% of Californians were staying at home in January vs. 49% in April, according to a University of Maryland travel metric.

And on a global scale, more travel activity increases fuel demand and makes crude oil costlier. West Texas Intermediate futures contracts, which had dipped below zero last April, reached a post-pandemic high of nearly $53 a barrel in late January.

The willingness of consumers and corporations to spend more on fuel is one signal of economic confidence. Please note recent price hikes at the pump aren’t happening just in California. Nationally, gasoline is up 29% to $2.61 a gallon since the early May lows.

Nobody likes to pay more at the pump. But the price signs at local service stations may be a solid, real-time economic barometer — and higher is likely better.

By the way, the 66-cent gap between California and U.S. prices this week is 2 cents below the three-year average difference paid by California drivers.

Source: Orange County Register