Gas prices hit 2023 highs in California as Tropical Storm Hilary hammers state

Californians are seeing gas prices reach 2023 highs as Tropical Storm Hilary makes its way out of Southern California, leaving a trail of flooding, power outages, and other damage in its wake.

The average price of gasoline rose $0.11 last week in the Golden State to $5.26 per gallon, the highest level of the year for the nation's most expensive state, according to AAA.

Over the same period, prices rose $0.02 nationally to $3.87 per gallon, per AAA's data. According to the EIA, the price of a gallon of regular gas reached $3.96 nationally last week, the highest since October.

"We saw wholesale prices spike higher as sellers were unwilling to sell into a market that might see refiners threatened by power losses, or other issues," OPIS global head of energy analysis Tom Kloza told Yahoo Finance on Monday.

California's gasoline is usually more expensive than the rest of the country because it is typically a special blend that is more expensive to produce. The state also imposes high taxes and fees associated with initiatives to reduce carbon emissions.

The threat of power outages and flooding from Hilary's impact on the state also threatens California's refining and distribution systems, potentially pushing prices higher.

"If a refinery were to shut down in southern California due to flooding, I expect that wholesale prices would rise at least $0.20 per gallon and that would be passed on to the consumer in five to seven days," Andy Lipow of Lipow Oil Associates told Yahoo Finance.

"The news of a flooding event would also cause the consumer to drive into the nearest gas station and fill up, draining available supplies," he added.

Kloza is also on the lookout for a drop in demand as Hilary moves out of the area and the cleanup begins.

"All hurricanes destroy demand," he said. "Instinct tells me that what Californians pay this week may be the highest prices they pay in all of 2023 as demand is set to drop and there will be additional gasoline production in the last 75 days of the year."