The price of a gallon of regular gasoline has risen above $3.50 in every major city in California. It is a harbinger of things to come if oil prices spike above $75. It also may be a measure of how much gas prices can affect the consumer economy.
The average national price of a regular gallon of gas is $2.81, so the prices in some California cities are 30% higher.
California’s three largest cities all have gas prices above $3.60. The price is $3.64 a gallon in San Diego, $3.65 in Los Angeles and $3.71 in San Francisco. Most other areas close to these cities along the West Coast have prices nearly as high. In Santa Barbara, the price is $3.70 and in San Jose it is $3.64. In Orange County, near Los Angeles, the price is $3.62. In total, the price of gas is above $3.50 in 12 large California cities, which make up a majority of the state’s population.
Among the reasons the gas prices in these cities are so high is the gas tax in California is among the highest in the nation at $0.467 a gallon. The state also mandates a level of gas standards for “clear gas,” which is the highest standard among all states.
Regardless of the reason California gas prices are high, they may reach a level at which they undermine consumer spending. This could become worse because a number of experts believe the price in the state will top $4 during the heavy driving season in the summer.
High gas taxes obviously harm the lower and middle-class groups hardest. Gas price increases can add hundreds of dollars to household costs, particularly for people who have to drive long distances to work. These hundreds of dollars, added to the base costs of housing, food and clothing, undermine discretionary spending and virtually kill these households as contributors to gross domestic product beyond their purchase of basic daily needs.
California could be the “canary in a coal mine” for how higher gas prices hit gross domestic product. If the past is any indicator, the damage will be substantial.