Drivers have been experiencing a wild ride with gas prices this year as sharp declines in crude oil prices drag national prices to lows not seen in years while supply disruptions lead to periodic upticks in Southern California. Mihaylo Economics Professor Jane Hall discusses the volatile market.
Southern California gas prices in 2015 have been among the most volatile in recent memory. After beginning the year with the lowest prices since the Great Recession, prices twice spiked above $4 per gallon. Now, prices at the pump are on a downward swing again, falling to below $3 per gallon on average. What’s driving the prices?
“California is basically an oil ‘island,’” Mihaylo Economics Professor Jane Hall says. “There is not significant capacity to move oil or oil products into the state except through the ports, by road and by rail, and even that capacity is limited, as is capacity to move gasoline within the state. When in-state refinery output falls, there is no easy way to replace it with imports from outside the state, and some potential imports would not meet state environmental rules. This translates to proportionally large changes in gasoline prices.”
Hall worked as a research economist in the oil industry prior to joining the Mihaylo faculty. Her current research and teaching interests are in Middle East economies and ecological and natural resource economics.