Gas prices: $4 a gallon national average almost ‘assured,’ analyst says

GasBuddy Head of Petroleum Analysis Patrick De Haan joins Yahoo Finance Live to discuss what to watch out for with gas prices surging amid the Russia-Ukraine war.

Video Transcript

- I want to bring in Patrick de Haan now. He is head of petroleum analysis at GasBuddy. Patrick, thanks for being with us. So look, we've got the spring driving season going to be here in just a few weeks. How much higher do you expect prices to go at the pump? Or do you think that they may have peaked?

PATRICK DE HAAN: Oh, I wish that we've peaked. I think we're a long way from that, unfortunately. On an average year, gas prices go up $0.25 to as much as $0.75 a gallon between March and Memorial Day. So just on average, the national average could get closer to that $4 mark. And then you have the Russia situation, which is pushing oil prices up close to $97 a barrel today. It's almost rest assured that the national average will eventually eclipse that $4 a gallon mark in the months ahead.

- And Patrick, it's Danny over here. So I am in Southern California. Why is California gas so expensive? It's not just the taxes. But it just seems like that seems to be the common factor that people point to in California.

PATRICK DE HAAN: Well, California is very unique. Geography, the entire West Coast generally is much at a premium compared to much of the rest of the country. You're relatively isolated. Refineries in the West Coast, there's not as many of them when. There are issues, you really feel it. But keep in mind, in California, it's not just the taxes, but the carbon management program as well that is cap and trade. Consumers basically paying $0.20 to $0.25 a gallon to be able to burn that gasoline. And that falls on top of state gasoline taxes. And that's why California, it's basically a shoe in we're going to see that $5 a gallon mark on average across the state. And it's not impossible that California could reach deeper into that $5 mark, maybe even $5.50 a gallon by Memorial Day weekend.

- So let's talk a little bit about what might at least help stabilize prices. We know that President Biden is speaking with other countries about tapping the Strategic Petroleum Reserve once again. He did it in November. It didn't seem to have a huge impact on prices. And then we've got that OPEC Plus meeting this week. Will any of that you think help?

PATRICK DE HAAN: Well, certainly some of it could help. You're going to need a lot of things to happen to really bring the price down, or at least limit its upside potential. You need a nuclear deal with Iran. Ease the sanctions on Iran. Then the 2 million barrels that they produce can make it back to the global market. So that's one piece that the President's been working on. Talks in Vienna continue.

Then you're going to need Saudi Arabia and potentially help from the UAE on increasing production. And that's if we lose that Russian 10 million barrels a day, which it's looking more and more likely every day that either the West is going to sanction their energy sector eventually or Russia could use that as leverage down the line. But almost nearly expect something to happen. And like I said, there are some offsets, including the SPR, Iran asking the UAE and Saudi Arabia to boost production. But it still could get more messy in terms of higher oil prices.

- And Patrick, to follow up with that, so another thing that I was hearing is that California has a more expensive summer blend. Can you explain a little bit more of that? And what do drivers need to know? Is that something that other states will also be experiencing as well or have?

PATRICK DE HAAN: Yeah, exactly. And that's part of the seasonality why gas prices almost always go up $0.25 to as much as $0.75 over the coming three months. And a lot of it does entail the switch over to summer gasoline. A lot of these areas have different blends. California, the California Air Resources Board is the one responsible for that standard. In the rest of the country, it's delegated to the EPA responsible for that.

And there's a lot of fragmentation between types of summer gasoline that all just pinch prices even more. And so that's why California, in addition to having its own blend, cap and trade, taxes, that's why prices generally are so much higher. But good reminder for what's coming is the transition, rising demand as Americans get back outside, and of course, refinery maintenance season.

- So what can drivers do, if anything, to reduce their gas bill in the way they maybe drive their cars or how frequently they fill up their gas tank?

PATRICK DE HAAN: Yeah. Absolutely. The way you drive is certainly a big one of them. 25% of it is driving behavior. If you're racing light to light, even slowing down a few miles an hour on the interstate-- remember back in the '70s during the oil embargo that the US lowered the speed limit. That does help. But even then, shopping around before you fill your tank up. Check the prices before you go out on GasBuddy, Google, or Waze.

And then on the payment side of things, sign up for a free loyalty program like Shell Fuel Rewards. It can knock a few cents off. Use credit cards. See if there's a cash discount. Even GasBuddy has a copay card as well. So on the payments and shopping around, reducing your consumption through driving better. And then make sure your vehicle is maintained. Get rid of that check engine light.

- And Patrick, I wanted to shift gears a little bit on the EV world. And do you think that because of these prices and that they will continue, like you said, to grow, will there spark more interest than for people to incline more in that, in purchase of an electric vehicle?

PATRICK DE HAAN: Well, it may spark more interest. No pun intended, of course. But it really takes consumers 6 to 12 months of elevated gasoline prices for them to see the thinking change and what's important in a new car. Keep in mind, too, a lot of supply chain disruptions may mean that there's less options for them. And so that may persuade them to hold off for now. But again, I think the longer prices remain high, 6 to 12 months, even beyond that, 18 months of high prices, will really increase the importance of fuel efficiency and/or potentially moving to an EV.

- We're going to have to leave it there. But Patrick de Haan, head of petroleum analysis at GasBuddy. Always good to see you. Thanks so much.