Why gas prices are going down, even in expensive California - USA TODAY

The national average for a gallon of gas fell last week despite a tumultuous period for oil prices after Hamas launched an attack on Israel.

A gallon of regular unleaded fell about 12 cents to $3.628 on Friday, according to AAA, a nonprofit federation of motor clubs that tracks fuel costs. The decline comes even as oil rose by about $5 to around $90 per barrel last week. The price of crude, which is refined into gasoline, makes up more than half the price of a gallon of fuel.

That price increase, however, is far from the roughly $40 per barrel temporary spike following last year’s invasion of Ukraine by Russia, AAA says. The critical difference is that Russia is a significant oil producer, while Israel and the Palestinian territories are not, it said.

“As long as this war does not spread to include more countries in the region, the effect on the oil market will remain muted,” AAA spokesperson Andrew Gross said in a statement.

Why are gas prices going down?

At a statewide average of $5.669 for a gallon of unleaded gasoline, Californians may not feel much relief at the pump. But prices are lower, down about 21 cents from a week earlier, to $5.878, AAA says.

Pump prices are dropping in the Golden State, as they are in the rest of the country, because of lower demand from drivers and less expensive blends of winter gasoline coming into the market. California actually introduced its winter blend earlier than usual year, and it contains a larger amount of a cheaper ingredient that helps cars start in lower temperatures. Typically, California doesn't make the switch until the end of October. Winter blend gas can shave 15 to 20 cents off a gallon of gas, said Doug Shupe, AAA spokesperson in California.

Why is gas so expensive in California?

California gas is generally more expensive than the rest of the nation due to:

1. High local taxes. Taxes can make up about 13% of the price of a gallon of gas, according to the U.S, Energy Information Administration
2. California's regulation for a special more environmentally friendly blend that tends to be more expensive
3. Reliance on local production or foreign imports and nearby refineries, some of which were shuttered for maintenance last month. "There aren't any pipelines around here," Shupe, said.

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Will gas prices keep falling?

Yes, according to experts.

If violence does not spread further in the Middle East and there are no other geopolitical shocks, "I remain optimistic the national average could decline another 25 to 45 cents by late November, with prices potentially falling nearly triple that in California,” said Patrick De Haan, head of petroleum analysis at GasBuddy.

But he said, "all eyes will be on the Middle East in the coming days to see what might develop."

More than 20% of global liquid petroleum in 2018 moved through the Strait of Hormuz, which is located between Oman and Iran, and connects the Persian Gulf with the Gulf of Oman and the Arabian Sea, EIA said.

Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.   

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Why gas prices are going down, even in expensive California - USA TODAY
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