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US refinery strike could add to factors driving up gas prices

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(NewsNation) — Gas prices, already boosted by global conflicts and government requirements, could rise even more as workers go on strike at a California refinery Monday.

The national average for a gallon of gas on Monday topped out at $4.2523, according to the American Automobile Association (AAA), just below the historic record of $4.33 reached earlier this month.

AAA said the slightly lower prices are due to the global price of crude oil coming down since peaking when the war in Ukraine began and demand dipping slightly as a possible response to higher gas prices.

More than 500 workers at a Chevron Corp. refinery in the San Francisco Bay Area went on strike early Monday in a contract dispute. Workers voted down Chevron’s most recent contract offer and the company refused to return to the bargaining table.

The company said refinery operations will continue despite the strike, and it does not anticipate any supply chain issues. If the strike were to shut down the refinery, that could negatively affect gasoline prices in California — which has the highest regular gas price in the nation at $5.86 per gallon, according to AAA.

The refinery supplies about 13% of California’s gas, jet fuel and other oil products.

“If it goes offline, it definitely will have an impact on our supply,” said Marie Montgomery with AAA of Southern California. “Traditionally, when California gets a supply issue from its local refineries, we have to actually physically ship gasoline, usually from Asia.”

Chevron had already reached a national agreement with oil workers. It included a 12% pay raise but the local chapter is reportedly asking for an additional 5% due to the higher cost of living in the Bay Area.

“I was on a quarter of a tank, filled up my tank (and) it was $70. I was like, ‘no, I can’t pay another car note to go back and forth to work,'” motorist Enriquo Forbes told NewsNation’s Nancy Loo.

Even before Russian tanks rolled into Ukraine, global energy supplies were struggling to keep pace with surging post-pandemic demand. The West’s punitive sanctions on Moscow, among the world’s largest oil producers and exporters, unleashed more turmoil on the market.

The price remained below a peak of nearly $140 hit earlier this month, but still some $15 a barrel more than before the Russian invasion of Ukraine.

Operators holds up picket signs and acknowledge honking horns outside the Chevron Corp. refinery, Monday, March 21, 2022, in Richmond, Calif. (AP Photo/Eric Risberg)
Attacks in Saudi Arabia, OPEC limits drive up prices

Yemen’s Houthi rebels on Sunday launched a series of attacks targeting Saudi Arabia’s oil and natural gas production. Saudi Arabia said on Monday that it “won’t bear any responsibility” for a shortage in global oil supplies after the attacks affected production in the kingdom, the world’s largest oil exporter.

The announcement comes as the kingdom remains in lockstep with OPEC and other oil-producing countries in a deal limiting production increases. Gulf Arab oil producers have so far resisted pressure from the Biden administration to pump more crude to help bring down oil prices that have soared amid Russia’s war on Ukraine.

AAA said it expects more volatility in oil prices “as geopolitical tensions continue unabated,” leading to significant fluctuations in the price of gasoline in the near-term.

Summer gas is more expensive

Another factor in rising gas prices: the Environmental Protection Agency requires a different blend of gasoline to be sold in the summer months than in the winter months. 

Why does that have anything to do with gas prices? Summer blend gas is more expensive to produce, explains Patrick De Haan, lead petroleum analyst at GasBuddy.

The deadline to switch to selling summer gasoline is June 1 for gas stations, but refineries start producing the pricier blend in March, so that’s when you’ll notice prices creeping up.

The Associated Press contributed to this report.

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