Smiling faces are aplenty at Westside gas stations with prices falling below $3 a gallon and continuing to plummet as crude oil sits at their lowest levels since 2009 and local demand declines.
The average price has dropped 73 consecutive days, shedding 76.5 cents during the streak, according to figures from American Automobile Association (AAA) and Oil Price Information Service.
Gas spectators are warning that such joy may be short lived however, with impending Cap-and-Trade carbon credits expecting to hit consumers come Jan. 1.
Local wholesale prices are at their lowest levels since July 2009 with Westside areas experiencing gas prices below $3 a gallon after five straight months of price declines, according to the Automobile Club of Southern California’s Weekend Gas Watch.
The retail state average fell to $2.95 a gallon for regular gasoline Wednesday, 9.1 cents less than last week.
The average price of self-serve regular gasoline in the Los Angeles-Long Beach area was at $2.98 per gallon, which is 10.3 cents less than last week, 27 cents less than last month, and 56 cents lower than last year, according to the Auto Club. In San Diego, the average price is $3.03, which is 4.9 cents less than last week, 27 cents lower than last month, and 67 cents lower than last year.
“OPEC actions to continue oil production at current levels has pushed crude oil prices below $70 a barrel, providing even more downward pressure for gas prices,” said Auto Club spokesman Jeffrey Spring. “Here in Southern California, local refineries seem to be operating at full capacity.”
The decrease in prices has helped elevate overall consumer optimism about the economy and that benefits all retailers, explained Jeff Lenard, Vice President, Strategic Industry Initiatives, National Association of Convenience Stores (NACS).
The elevated optimism also benefits convenience stores and in-store sales, he said.
“While lower gas prices don’t make consumers more hungry or more thirsty, it does make them more likely to satisfy their hunger or thirst at the store, instead of waiting till they get home,” Lenard explained. “There may also be a lift from the 25 percent of consumers who pay for gas by cash. They generally purchase a specific dollar amount – for instance, $20 – and as prices have fallen, they may not just spend all $20 on gas but on other items inside the store.”
The introduction of smartphone apps such as GasBuddy, Gas Guru, and AAA’s own cheap gas finding app is also allowing consumers to hunt for the best prices around.
“Gas prices have an impact on consumer sentiment unlike any other product,” Lenard explained. “You don’t see that about any other product, whether milk, bread, or eggs.”
One of the challenges facing gas retailers aside from the low-price battle is that some stations are “branded” and locked into one distributor for their supply, said Marie Montgomery, spokesperson for the Automobile Club of Southern California.
“Price variation at gas stations is caused by many of the same factors as price variation of groceries or other commodities,” she said. “While the product itself is essentially the same because the formula used is regulated by the state Air Resources Board, some stations have higher overhead costs because of their locations, some stations have less or more competition nearby, and some stations are “branded”, i.e. Shell and Chevron, while others are independent which can cause cost differences.”
On a national level, California usually has the most expensive gas prices in the U.S. except for Alaska and Hawaii, Montgomery said.
According to gasbuddy.com, the cheapest average gas price on Dec. 10 in the country was in St. Louis, Missouri at $2.20 a gallon. The five cheapest states by average regular price were Missouri ($2.32/gallon), Oklahoma ($2.40/gallon), Mississippi ($2.41/gallon), Texas ($2.42/gallon), and South Carolina ($2.43/gallon).
With current falling price wars aside, looming in the corner of 2015 are California’s Cap-and-Trade regulations that will see carbon credit costs more than likely passed on to consumers from Jan. 1.
The California Air Resources Board’s Cap-and-Trade credits will be levied on all gas distribution businesses with a move to reducing the total emissions from cars and trucks using gasoline and diesel in California.
“The cap places a hard limit on how much gasoline and diesel can be sold,” according to CA Fuel Facts.
Carbon credit auctions have already been taking place as part of the program with consumers expected to pick up some of the slack, explained Tom Kloza, Global Head of Energy Analysis at Oil Price Information Service.
“Based on the auctions and quotas, it looks as though it’s going to be 10-12 cents extra per gallon,” Kloza said.
“This is the first time that we have seen this in the U.S,” he added. “The rest of the country is watching.”
While it is difficult to speculate on anything in the open market, with less than 30 days to go until the program takes effect, Kloza estimates that the initial increase won’t be “the end of the world.”
That is, until crude oil prices increase.
Statistically, spring sees gas prices begin their upward drive and with the next OPEC meeting scheduled for June 2015, Kloza said that high prices may not be too far away.
Currently the $63 a barrel price for crude is the lowest since 2009, but with speculation that the June OPEC meeting could see a break up of the current cartel, Kloza’s advice is to enjoy the low prices and fill-up your tanks while you can.