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California has the highest gas prices in the nation, averaging $6.21 per gallon of regular unleaded. Even higher prices are found in parts of Southern California and the Bay Area, where some gas stations have been spotted charging as much as $8 a gallon. 

According to AAA, the national price for gasoline across the nation in late May was $4.59. Why are we paying so much more? AV狼 Lecturer of Economics Farhad Sabetan tells us why this is happening and if there is an end in sight. 

Why are prices so high? 

FS: The prices are rising as a result of supply and demand for oil. 

Sanctions are being put on Russia, one of the biggest suppliers of oil, as a result of the unfortunate war with Ukraine. Therefore, the supply of oil has declined significantly. Demand is up as people start heading out for summer travel. 

Why does California have the highest prices for gas in the country?

FS: In general, gas prices are determined by a base price and adjusted by some index of cost of living such as the consumer price index. The cost of living in California is higher, incomes are higher and the oil companies will charge people based on their ability to pay. If people in California have the ability to pay more, in theory, then oil companies will charge them more. 

Unfortunately, this kind of price increase is going to influence inflation in California, which is undesirable. 

Will we see relief? 

FS: We might see some relief beginning in the third quarter. That’s when the supply will start to catch up with demand and prices will stabilize, but we will not see the prices that we saw at the beginning of this year before the hike. 

What is your advice for consumers? 

FS: Buy what you need, not what you want. When it comes to driving, try to group your errands or trips by location and date, so that you use less gas. 

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