Coming off a lackluster January, fuel retailers were hoping to see stronger demand as the most extreme winter weather subsided. For most of them, the forecast cooperated and transactions picked up the slack, both at the pump and inside the convenience store. But issues with the supply chain in one part of the country produced some outlier figures.

For more, read ahead and get our take on the month in fuel. 

Last month's data

A stable, encouraging month... for three of four U.S. regions

On the supply side, rack prices for regular gallons of fuel in most American regions were remarkably stable, moving by less than 2 cents per gallon in the Midwest, Northeast, and South. The national average rack price ticked up by 3.4 cents per gallon, largely driven by sharp spikes in the West. (This requires a deeper dive — more on that in a second.) 

For a moment, let’s exclude the West from consideration. In each of the other regions, sign prices saw modest increases. Coupled with those shifts in rack prices, retailers in each of these three regions saw improved margins in February. 

On the demand side, retailers were hoping for a bounce-back month after a disappointing January. Though the first month of the year is typically the slowest for daily fuel and c-store traffic, January 2025 was especially lackluster. In February, demand for both fuel and convenience store items saw considerable gains in most areas. Warmer regions led the charge — for example, c-store traffic in the South was up nearly 8% over January, whereas demand improved but by a lesser amount in the relatively cold Midwest.

The outlier in the chart above is the West, of course. If you live in California or a neighboring state, you’ve likely seen those higher prices every time you pass a station. We know that fuel is often more expensive in California, but what led to such a dramatic increase in sign prices and rack prices in February?

On February 1, a major fire broke out at the Martinez Refining Company in the San Francisco Bay Area. The fire burned for three days, shutting down production at the refinery for the entire month. 

California mandates state-specific standards on gasoline and enforces some of the most restrictive refinery regulations in the country. That means it mostly depends on local producers like the Martinez refinery to supply its large population. Martinez produces about 10% of California’s gasoline supply, so when that supply suddenly evaporated, the regional market quickly saw higher rack prices (with sign prices following suit).

Though the whole region was affected, the price increases were felt most at stations nearest to the fire in Northern California. Take a look at the chart below — sign prices at stations in the Bay Area were almost doubly impacted compared to those in Southern California.

The higher sign prices in California were not enough to stop the seasonal rise in demand — the month of January left little room to go anywhere but up. Compared to the previous month, California stations saw a 3.2% increase in regular gallons sold each day and a 4.9% increase in c-store transactions in February. 

The drop in demand becomes more clear when comparing gallons sold year-over-year. In February 2025, the average California station sold 4.9% fewer gallons of regular fuel each day compared to January 2024. C-store transactions were unaffected by the sign price increases, though — those same stations processed 3.8% more c-store transactions.

Some consumers might think that those higher sign prices would benefit the retailers charging them, that was not the case in this instance. In California, the average station did not pass all of its rack price increase onto consumers, resulting in a 2.4% decrease in regular fuel margins. That bucked the national trend.

So, what happens next? PBF Energy, the owner of the Martinez refinery, said it expects partial production at the refinery to resume in Q2, returning to full production in Q4. The state’s return to full production capacity may be brief, though. Late last year, Phillips 66 announced plans to shut down its Los Angeles refinery at the end of the year.

The recent elevated prices from the refinery fire could foreshadow long-term increases across the Golden State. 

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Predictions and considerations

Tariffs loom — what could that mean for fuel prices?

March is ordinarily a peculiar month in fuel, as refineries manage the transition to their more expensive summer blend of gasoline. This shift will eventually cause prices to rise, but there may be some local, short-term discounting for consumers as refineries and stations try to sell off remaining inventories of winter-blend fuel. 

This month could produce some unexpected results, though, because of the threat of new tariffs on American imports. Obviously, this situation is very fluid — at the time of this publication,  the implementation of tariffs on most Mexican and Canadian products has been delayed twice. Tariffs were in effect for two days at the start of March, so in a few weeks, we’ll analyze the impact of those tariffs and share any insights that we can gather. Should those tariffs go into effect for a longer period of time, we could see rack prices and sign prices increasing for all grades of gasoline. More to come in April.

Potential tailwinds:

1. We expect a seasonal increase in fuel demand as the weather continues to get warmer and more people hit the road.

2. OPEC+ reaffirmed that it will proceed with a planned oil output hike next month. Increasing the supply of fuel should help suppress sign prices and rack prices for both consumers and retailers. 

Potential headwinds:

1. Potential new tariffs on international imports still loom. Tariffs on Canadian energy imports would directly impact the price of fuel in America.

2. Anytime you introduce uncertainty, it has an indirect impact on consumer behavior. Concern about higher prices could lead to lower economic activity.

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