Here's why gas prices are down, even in pricey California, as Israel-Hamas war escalates

The price of a gallon of gasoline continues to fall, despite a tumultuous period for oil prices after the Hamas attack on Israel earlier this month.

The national average for regular unleaded gasoline fell by about 3 cents, from $3.628 on Friday to $3.60, according to AAA, a non-profit federation of automobile clubs that monitors fuel costs. The drop comes as oil prices hover around $90 a barrel. The price of crude oil, which is refined into gasoline, accounts for more than half the price of a gallon of fuel.

Oil prices rose after Hamas’s surprise attack on Israel ten days ago, but the increase was much smaller than the temporary rise of around $40 per barrel after Russia’s invasion of Ukraine last year, according to AAA. The fundamental difference is that Russia is a major oil producer, while Israel and the Palestinian territories are not.
“As long as this war does not spread to other countries in the region, the effect on the oil market will remain limited,” AAA spokesman Andrew Gross said in a statement.

Why are gas prices going down?

With a statewide average of $5.621 per gallon, Californians aren’t exactly feeling relief at the pump. But prices are lower, down more than 18 cents from the previous week’s $5.804, according to AAA.
Prices at the pump are falling in the Golden State, as well as the rest of the country, due to lower demand from motorists and the arrival on the market of cheaper winter gasoline blends. This year, California introduced its winter blend earlier than usual, and it contains more of a cheaper ingredient that helps cars start when temperatures are lower. Normally, California only makes this change at the end of October. The winter gasoline blend can reduce the cost of a gallon of gasoline by 15 to 20 cents, said Doug Shupe, spokesman for AAA in California.

Why is gas so expensive in California?

California gasoline is generally more expensive than in the rest of the country for the following reasons:

High local taxes. Taxes can account for around 13% of the price of a gallon of gasoline, according to the U.S. Energy Information Administration.
California regulations on a special, more environmentally friendly blend that tends to be more expensive.
dependence on local production or foreign imports and nearby refineries, some of which were closed last month for maintenance. “There are no pipelines here,” said Mr. Shupe.

Will gas prices keep falling?

Yes, according to the experts.

If the violence doesn’t spread further to the Middle East and there are no further geopolitical shocks, “I think the national average can go down another 15 to 35 cents,” said Patrick De Haan, head of oil analysis at GasBuddy.
He added that he remained “cautious because it depends on actions that are not predictable, mainly the conflict in the Middle East”. For now, the national average should soon fall to its lowest level in six months”.

More than 20% of the world’s net oil in 2018 passed through the Strait of Hormuz, located between Oman and Iran, which connects the Persian Gulf to the Gulf of Oman and the Arabian Sea, according to the U.S. Energy Information Administration.