Q&AZ: Why have the gas prices in Phoenix stayed so high in 2023?
Through KJZZ's Q&AZ project, several listeners have asked why gas prices in the Valley have been so high this year.
Gas prices in the Phoenix area have been trending way above the national average for most of 2023, and that’s not usually the case. Arizonans have noticed that disparity when traveling to the Gulf Coast, East Coast and other parts of the country. And they want to know what’s causing the big, sustained spike in local prices.
Like so many products, the price of gas is driven by supply and demand. This year, Phoenix fell victim to supply disruptions based on two factors.
First, Arizona has no refineries of its own, so all gas has to be delivered from out-of-state refiners. Second, the Environmental Protection Agency and state regulations require a special blend of oxygenated gasoline called Clean Burning Gas, or CBG, in Maricopa County to help keep down air pollution in metro Phoenix.
Arizona’s gasoline is refined in southern California, southern New Mexico and western Texas, according to Dennis Hoffman, a professor of economics at Arizona State University. The Phoenix area gets its gas from California, while Tucson gets most of its gas from Texas, according to the U.S. Energy Information Administration.
But refinery maintenance that had been delayed several years by the pandemic caused a significant supply shortage this year.
“The refineries in El Paso and southern New Mexico went offline for a significant period in March and April, and that is what limited supply for the Arizona blend,” Hoffman said. “So that made us scramble to get the blend made in other refineries.”
There are different CBG blends for summer and winter, according to the Arizona Department of Agriculture. The summer blend is meant to keep gas from evaporating quickly in the high temperatures. However, this makes the summer blend more expensive than its winter counterpart, but the summer blend does have slightly better mileage, according to the Auto Club of Southern California.
Arizona has special, or boutique, blends of gas, which are more expensive than common blends, Hoffman said. And that tends to exacerbate any supply issues, because there are fewer refineries manufacturing those blends.
“So, if we could identify a blend that had greater availability, that might help us deal with this issue,” Hoffman said. “Of course, the second solution would be to build a new refinery, but there appears to be no one eager to do that right now.”
The newest California refinery launched operations in 2021, and it was the first new refinery in the state, that is still open, since 1982, according to the California Energy Commision. Refineries typically need a turnaround maintenance every three to five years, according to the Texas-based Kendrick Oil Company.
Hoffman says prices go up when refineries close for maintenance, even scheduled maintenance, but it was unusual for two refineries to close at the same time.
Before any gas comes to Arizona, it first must go through regulation checks by Arizona’s Weights and Measures Services Division. The gas being piped into the state stops at distribution terminals to be blended with up to 10% ethanol to make it CBG and have samples taken. The gas is then taken to the dispensing site, where more samples are taken to be documented.
Since last year, Arizona has seen a price decrease from $5.12 in 2022 to $4.41 as the present average, according to AAA. That’s still far above the national average of $3.55.
Hoffman has observed that Arizona gas stations have had greater price variations recently, and says that could bode well for motorists.
“When you see disparities like that, it’s a sign, frankly, you’re coming off the high prices if you see one or two low ones,” he said. “That’s actually good news. That’s a sign that competition is starting to take over, and prices are headed down.”
Hoffman did note that it is summer travel season, which brings up the demand and price for gas. And he said that will likely slow the descent of Arizona’s gas prices.