Opinion

Breaking Down California's 'Mystery' High Gas Prices

Why Californians are paying $6 per gallon for gasoline while Texans pay less than $4.

Gasoline prices are averaging about $5.90 per gallon in California compared to $4.24 per gallon nationwide. In many coastal California counties, gasoline exceeds $6.00 per gallon.

California gas prices have long been higher than those nationwide due to higher taxes and the state’s specialized reformulated gasoline blend. But the difference has been steadily growing over the last decade and especially in the past year.

Some liberals call the gap between California and U.S. average gasoline prices a “mystery surcharge.” It’s not a mystery. It’s the direct result of progressive policies.

In 2012, a gallon of gasoline in California cost about 30 cents more than nationwide. This could be entirely explained by its higher taxes and specialized reformulated blend. The latter adds an estimated 10 to 15 cents per gallon.

Democrats in 2013 instituted a cap-and-trade program, which required refiners and other industrial businesses to reduce their CO2 emissions or buy credits. Over time the statewide cap on CO2 emissions has declined, thereby increasing the price of credits.

According to the Western States Petroleum Association, the program now adds 24 cents to the cost of each gallon.

Photo Credit: Zeng Hui/Xinhua/Alamy Live News

In 2015, the California Air Resources Board layered on a “low-carbon fuel standard,” which requires refiners to reduce the “carbon intensity”—meaning total emissions from production, transportation, refining and combustion—of the gasoline they blend.

Refiners are rewarded for using more biofuels. If they don’t meet CARB’s benchmark, they must buy regulatory credits. The program adds an estimated 22 cents per gallon to the price, according to WSPA.

In 2017, Democrats raised the state’s gasoline excise tax by 12 cents per gallon and linked it to inflation. California also imposes a sales tax on gasoline. So when the wholesale price of gasoline rises, drivers pay even more in taxes.

Californians pay about 73 cents per gallon in state taxes compared to 39 cents nationwide and 44 cents in Florida, 25 cents in Arizona and 20 cents in Texas.

California’s environmental regulations have spurred several refineries to shut down in recent years. Some are converting to producing renewable diesel, which is more profitable due to federal and state subsidies and regulatory policies.

For instance, a Marathon Petroleum refinery in Martinez, California and a Phillips 66 refinery in the Bay Area are being retrofitted into renewable diesel refineries.

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Between 2017 and 2021, the state lost about 12% of its refining capacity. It is set to lose another 12% by next year.

California refineries are among the only sources of the state’s mandated squeaky clean blend of gasoline. Refinery shutdowns have tightened the state’s gasoline supply, which has driven up prices.

When a single refinery drops off-line, gasoline has to be imported from select foreign refineries that can produce its special blend, namely in South Korea and New Brunswick, Canada. These deliveries can take weeks and are expensive.

A few weeks ago an unscheduled outage at a major refinery in Torrance caused prices in California to shoot up even more.

Photo Credit: REUTERS/Bing Guan / Alamy Stock Photo

Even as gasoline prices nationwide have ticked down in the last week, they’ve continued to climb in California.

California Gov. Gavin Newsom last week proposed sending every Californian who owns a car registered in the state (including electric vehicles) $400 “gas tax rebates.” But at today’s prices, Californians on average would pay more than $860 this year on gasoline than drivers in the rest of the country.

Produced by: Allysia Finley
Visual Editor: Esther Plecy
Cover photo credit: Piotr Adamowicz / Alamy Stock Photo