California gas hits $6 a gallon, but drivers should soon be paying less

A U-turn is in sight for California drivers paying more than $6 a gallon for gasoline after spot market prices fell sharply.

The drop reflects a switch to winter-grade gasoline, made available earlier than usual after Governor Gavin Newsom Thursday lifted an anti-smog rule to relieve consumers and keep inflation in check. 

In Los Angeles, California’s biggest spot market, gasoline fell to 77.5 cents a gallon above Nymex futures on Friday, about half of where it was Thursday and down by $1.10 a gallon earlier this week, Bloomberg data show. 

The spot market dictates wholesale costs, which in turn informs retail prices. California’s retail gasoline price has risen to $6.08 a gallon, $2.25 above the US average, according to data from the American Automobile Association. Consumers could see lower pump prices by next week.

Winter-grade gasoline is cheaper because it can be made from a wider pool of components that are typically less costly, such as butane. The rest of the US already has moved to winter grades; California has the longest stretch. 

Still, environmental compliance in California will keep gasoline more expensive than in the rest of the country. Winter gasoline in the Golden State currently costs 29.08 cents a gallon in carbon credits, a meager discount compared to 29.16 cents for a gallon of summer grade, according to data from Argus Media Ltd. Carbon credits, part of a state program designed to spur a move away from fossil fuels, have surged since July and are trading at close to record highs.