Nearly a month after an explosion at Martinez Refining Company reduced gas supplies at the pump and pushed up costs, motorists around the Bay Area are starting see a return to normal pricing.
The Feb. 1 fire at the refinery, which led to a shelter-in-place order that lasted several hours and unhealthy air quality that persisted for days throughout Martinez and surrounding cities, resulted in a spike in gas prices around the Bay Area in the following days. By the end of February, gas prices dropped closer to their usual level.
The wholesale price of gas in California is typically 15 cents higher per gallon than the prices in New York or Gulf Coast states. But right after the fire, the price of gas went up to about 50 cents higher than its national counterparts, said UC Berkeley professor Severin Borenstein, an expert on the economics of renewable energy and reducing greenhouse gases.
By Thursday, the wholesale price of gas in California had fallen to more normal levels in comparison to the rest of the country, Borenstein said. However, it may take a month or so for the drop in the wholesale price of gas to be reflected in the price customers pay at the pump.
AAA acknowledged the dropping prices on Friday. It noted in a news release that gas prices decreased by 3 cents to a national average of $3.12 this week. The cost of unleaded gas in San Francisco was $5.05. In Oakland, the average fuel cost was $4.98. Gas prices in San Jose were around $4.91. Last week, the average price per gallon in California was $4.84 cents, the highest in the country.
“The good news is that the spot price has now come down to its normal relationship to the rest of the country,” Borenstein said. “The bad news is that it takes a while for that to pass through to retail.”
This pattern is “quite common” after fires at refineries, including the 2015 fire at an Exxon refinery in Southern California and 2012 fire at Chevron’s refinery in Richmond, Borenstein said. And when explosions or fires like these happen at refineries, if the market is already tight, price spikes can follow.
Further cost reductions could follow once the strain on supplies eases, but the state’s system for implementing clean energy initiatives while meeting residents’ demand for gas has led to some inefficiencies. Catherine Reheis-Boyd, president and CEO of the Western States Petroleum Association, said that the remaining refineries in California are all tight on supply, and it is difficult to meet customer demand.
Throughout the 1980s, the state had around 30 to 40 oil refineries. Now there are no more than 13 refineries in California, according to the state energy commission, with one closing by the end of this year. With the strain of supplies, Reheis-Boyd said that “any kind of disruption can have an impact on the supply.”
When refineries are offline, the state may import gasoline, which may take weeks or months as companies tend to hesitate before selling gasoline at unprofitable prices.
Brandon Matson, a spokesman for the Martinez Refining Company, said this week that the refinery provided around 25% of the Bay Area’s gasoline supply last year, about 55% of Oakland and Sacramento airports’ jet fuel supply and around 40% of San Jose and San Francisco airports’ jet fuel supply.
Reheis-Boyd also said that Californians also tend to pay a lot for gas because an additional $1.29 on the gallon from federal and state taxes and fees, and costs for climate programs and making its fuel follow “cleaner-burning gasoline” requirements.
Additionally, California’s efforts to switch to electric vehicles and reduce the demand for gas has made slow progress. There were almost 2 million electrical vehicles sold in the state, as of August 2024. But there were still over 31 million gas-powered cars on its roads in 2023, according to the Department of Energy.
“There are a lot of states that don’t produce any gasoline and import all of their gasoline … you just have to make sure that those supply lines are adequate,” Borenstein said. “And California is not set up for that right now. But part of the energy transition, I think, is going to require us to get better at bringing fuel into the state.”
Reheis-Boyd advocated for the state’s keeping its remaining refineries open and drill for crude oil from Central California to prevent congestion at ports while also not sacrificing the state’s environmental program by upgrading the grid to handle increasing electrification.
The refineries “are going to have to close if we are going to get off gasoline, but I think we have to have realistic expectations about how quickly we’re going to get off gasoline, and we have to make sure we have a plan for smoothing the transition,” Borenstein said.