Gas prices have been headed down across the country in recent weeks, but they have barely budged in Arizona, where filling up will cost you more than $1 more per gallon than the national average.
So, what gives?
Industry analysts say a confluence of factors, including the annual shift to summer gas blends, tight pipeline capacity and refinery shutdowns, have contributed to Arizona’s stubbornly high gas prices of late.
The average price of regular unleaded gas across Arizona was $4.68 per gallon on Friday, down about 2 cents in a week but still up about 18 cents from a month earlier, according to AAA data.
In Tucson the average gas price on Friday was $4.70 per gallon, though until recently prices in the Old Pueblo were typically lower than the state average.
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In contrast, the national average gas price on Friday was $3.54 per gallon, down about 2 cents in a week and about 8 cents less than a month earlier.
Statewide, gas prices in Arizona are now a couple cents less than a year ago, when gas prices were spiking in the wake of Russia’s invasion of Ukraine.
Nationally, a recent decline in the price of crude oil — which represents about 60% of the retail cost of gasoline — has helped tamp down prices.
But beyond oil prices, regional factors including fuel supply chains and demand have much to do with what motorists pay at the pump.
Capacity crimp
In Arizona, a combination of factors — some long-term, some short-term — have kept gas prices higher than the nation recently, said Patrick De Haan, head of petroleum analysis for the online gas-price tracking site GasBuddy.
First, the two major fuel pipelines serving Arizona — one from the west connecting refineries in California to Phoenix and Tucson, and an eastern pipeline bringing products from refineries in New Mexico and Texas — are reaching their capacity limits because of increased demand driven by rapid population growth, De Haan said.
“Pipelines have not been able to keep up with the increase in population, so there’s not enough pipeline capacity to bring the gasoline in to the number of people, in Phoenix especially,” he said.
Maricopa County led the nation in numerical population growth in 2022, adding nearly 57,000 residents for an increase of 1.3% as of July 1, according to U.S. Census Bureau data. Pima County added about 12,600 residents in 2022, up about 1.2%.
That tight pipeline capacity only exacerbates problems when supplies are disrupted through things like refinery shutdowns.
Refinery repairs
Right now, part of the problem is that two refineries that supply Arizona with fuels from the East have been shut down at the same time for maintenance, further crimping supplies.
Except when down for maintenance, oil refineries run 24 hours a day, every day. Arizona has no operating oil refineries.
AAA Arizona spokesman Julian Paredes cited the maintenance closures of refineries in El Paso, Texas, and Artesia, New Mexico, as a major factor in Arizona’s gas-price surge.
“That affected the supply of gas across the entire state, and especially for the Pima County area, but the state average has at least stabilized and isn’t creeping higher for now,” Paredes said.
Refinery outages in California were blamed for a rapid run-up in Arizona gas prices last fall, creating wide disparities in prices even across Tucson as some stations sold off fuel purchased at a lower cost and others were forced to raise prices.
De Haan said refineries nationwide typically shut down in the spring for maintenance, but the eastern refinery shutdowns come as supplies from California have been limited.
“Most refineries do maintenance ahead of the start of the summer driving season, to make sure they’re they’re ready for summer,” he said. “The problem is then, with the lack of refineries from the east, an inability to ship more product from the west.”
Compounding the problem is the fact that many refineries put off maintenance last year amid low pipeline capacity, making this year’s maintenance work more extensive, De Haan said.
“Many deferred last year’s maintenance to this year, and this is the price,” he said. “There’s just not much you can do about it, grin and bear the price.”
A confluence of factors have kept gas prices in Tucson and across Arizona higher than the nation.
Blends dilemma
Making matters worse, De Haan said, is that the supply issues are coming as Arizona and California shift to summer gasoline blends with ethanol required under environmental laws to reduce air pollution, particularly in Maricopa County.
In the winter months, gas retailers in a designated area including Maricopa County and small parts of Pinal and Yavapai counties must sell a special “Cleaner Burning Gasoline” or CBG blend specified by the state Department of Environmental Quality.
Tucson and the rest of the state are not subject to those requirements and so non-CBG may be sold there.
In the summer months — from the end May to the end of September — the Maricopa County area gets a different required CBG blend, while another designated area comprised of sections of Pinal County including Casa Grande gets its own state-required blend.
Meanwhile, California switches to an entirely different blend, which also affects the regional market, De Haan said.
The transition generally starts in March, De Haan explained, as temperatures warm and pipeline operators are purging their pipelines of winter gas, since pipelines can only carry one formulation at a time.
“The complexity is that as the transition is starting, there are several different requirements in use across the state,” De Haan said, noting that the changeover to different formulas is generally done in steps.
“But when you lack pipeline capacity from the West, and then refineries go down that supply the market from the East, and then you have all the fragmented rules on what types of gasoline (is required), that can lead to an explosive environment, which is exactly what we saw across Arizona,” De Haan said.
Some relief seen
Motorists should see some relief in the near term as the refineries resume production, De Haan said.
“The transition to summer gasoline is basically behind us, so that that simplifies the situation and that’s why we are starting to see prices ease a little bit,” he said. “The price of oil has gone down somewhat, so there’s been other factors that have helped to tip the scales, and now we are starting to see slight price improvements.”
AAA’s Paredes said any price break may be short-lived.
“When the Texas and New Mexico refineries come back online, which is expected soon, and normal supply lines return, you can expect Arizona gas prices to be more in line with the national average,” Paredes said. “However, this comes just before Memorial Day travel, which marks when gas prices go up anyway.”
Looking ahead
De Haan said Arizona could face similar supply issues next spring, though it’s somewhat unusual for two major refineries in the same region to be shut down for maintenance at the same time.
“This is a problem that could repeat itself, this run up, in the spring because the ingredients are still going to be there next year for the same problem,” he said.
Meanwhile, a longer-term solution to Arizona’s fuel-capacity issue may be in the works.
Kinder Morgan, which operates the fuel pipelines serving Arizona, is considering a major expansion to its pipeline leading from El Paso to Tucson to boost capacity, De Haan noted.
In April, the Houston-based pipeline company began soliciting comments and commitments from fuel shippers in support of the proposed expansion, which it says will be scaled according to demand.
De Haan said policymakers also could ease the supply situation by standardizing CBG requirements.
As it is, the U.S. Environmental Protection Agency sets and enforces clean-gas standards except in a dozen states — including California and Arizona — that have regulations that are more stringent than federal rules.
Policymakers could help consumers save money by standardizing clean-burning gas formulas nationwide, or at least among states that share supply pipelines like California and Arizona, which would save consumers money, De Haan said.
“This would save motorists nationwide, if there was one standard, it doesn’t matter where it’s produced or where it goes, it can be used interchangeably,” he said. “This fragmentation between types of gasoline even in Arizona is just the dumbest idea we’ve ever had — politicians have no idea of that complexity they’re introducing.”
“When there’s enough pipeline capacity, nobody notices it because the system’s running, but when things break, then suddenly we realize the complexity of the system that has been created,” De Haan said.
With gas prices staying stubbornly high in Tucson and across Arizona, some small steps can add up to save you real money on your fuel bills.
Contact senior reporter David Wichner at dwichner@tucson.com or 520-573-4181. On Twitter: @dwichner. On Facebook: Facebook.com/DailyStarBiz
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