Here’s Why Californians Are Getting Reamed At The Gas Pump Despite Rock-Bottom Oil Prices

From The Daily Caller

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Chris White Tech Reporter

March 28, 2020 7:55 PM ET

  • Gas prices are falling all over the United States, with some areas enjoying close to $1-per-gallon gasoline, as oil prices and coronavirus are delivering a one-two punch.
  • Californians are not getting as much relief at the pump as some Kentuckians and Tennesseans who are enjoying sub–$1 per gallon prices.
  • Environmental policies, gas taxes and a lack of oil refinery capacity are pushing prices up on Californians as the state’s economy contracts.

Gas prices are falling all over the country as oil prices tumble, yet prices are still relatively high in California, where environmental polices are restricting how oil refineries can produce gasoline.

The price of a gallon of gas has plummeted in Ohio to around $1 in part because Americans are self-isolating to avoid spreading the novel coronavirus. The average price dropped 35.1 cents over the past month, according to data from the AAA and Oil Price Information Service.

A BP station in Kentucky, for instance, posted a price below $1 a gallon, The Washington Post reported Thursday. Four other stations in Oklahoma City followed suit, along with another in Paris, Tennessee. The national average for gas on Thursday was $2.03, down from $2.41 at the beginning of March.

The decrease is due in part to the virus, which began in China and has killed more than 30,000 people worldwide, as well as the oil wars between Saudi Arabia and Russia. Prices remain in the low $30s after the Saudis pushed for a cut in output while Russia increased to squash U.S. natural gas.

California is lagging behind even though the average price of a gallon of regular gasoline dropped in Los Angeles County to its lowest since 2018, falling 2.7 cents to $3.21, according to CBS Los Angeles. (RELATED: Here’s Why Californians Pay Way More For Gasoline Than Everyone Else)

Analysts say the state’s prices will eventually come down to the national average, but it might take some time. Here are some of the factors that affect California’s pump prices, which are the highest in the continental United States, according to data from AAA.

Taxes, Taxes And More Taxes

Former Gov. Jerry Brown signed a bill in 2017 imposing a 12-cents-a-gallon increase on citizens and raising the tax on diesel fuel by 20 cents a gallon — the figure is a percentage of the whole price. Thus, when there’s an increase in the underlying price of fuel, the sales tax also increases.

The State Board of Equalization, which is responsible for administering California’s tax policies, sometimes annually adjusts the state’s two excise taxes to help offset changes in the sales tax.

California is the seventh highest in the country when it comes to total taxes and fees, according to figures the American Petroleum Institute calculated. The recent increase makes California the second-highest gas tax in the country behind Pennsylvania.

Analysts say taxes are a big burden.

“The bottom line is that the first $1.12 per gallon paid at the pump goes to ever-increasing state taxes and to California’s extensive regulatory regime,” Kevin Slagle, vice president of communications for Western States Petroleum Association, told the Daily Caller News Foundation.

Strict Fuel Formula Mixture

California’s strict environmental rules mandate gasoline sold within the state be produced according to strict formulas designed to reduce pollution. For citizens, the exotic formula makes a gallon of gas more expensive and difficult to produce. Few refineries outside the state are equipped to produce it.

Worse yet, the gasoline formula changes multiple times a year, switching from a winter recipe to a summer blend designed to slow down evaporation. The summer blend is even more expensive and trickier to make, thereby elevating the risk of refinery mishaps. Refiners also use up inventories of either blend before the switch, increasing the risk of price volatility.

No Interstate Pipelines And Few Refineries

Analysts say the lack of refineries and environmental policies are also playing a role.

“California is a bit of a petro island,” Patrick DeHaan, a petroleum analyst at GasBuddy, told the DCNF, referring to the state and the West’s overall lack of oil refineries. “There’s less potential relief avenues if refineries have issues.”

California has 15 refineries with the ability to produce 1.9 million bpd, giving the West Coast few ways of obtaining fuel from the Gulf Coast or other parts of the country. The Golden State gets fuel from Asia and the Middle East when refineries are shuttered due to shortages.

“There have been a number of refinery closures in the last 10, 15, 20 years as California has become more restrictive on how to produce gasoline and what specifications that they have to get to,” DeHaan said.

He added: “Environmental policy has been one of the reasons (gas prices) have been higher than in other areas.”

Californians could eventually feel some relief, but state “is going to have some catching up to do,” DeHaan said.

Interstate pipelines could funnel gasoline quickly and cheaply to California, but no such pipelines exist connecting West Coast refineries to the Golden State. The state must therefore get the bulk of its fuel from ship or truck.

Only when pump prices are soaring inside California is it worth it to pay those transportation costs for refiners capable of producing California’s gasoline formula. The state’s refineries also tend to keep inventories tighter than the national average, federal energy statistics show.

As a result, prices surge quickly when a disruption occurs from events such as machinery breakdowns, power outages or labor problems. Imports of gas into California increased to more than 10 times their typical level after an explosion in 2015 took an ExxonMobil refinery in the state offline.

State officials accepted thousands of barrels of refined oil from Russia and India at the time.

California Gas Stations Are Disappearing

California officials have increasingly rezoned land leading to more housing developments and fewer service stations. Exploding housing prices prompted the decision to rezone, if for no other reason than to relieve the problem and lower rent prices.

Median monthly rent for a single-bedroom home in San Francisco is roughly $3,400 as of late 2019, according to industry tracker Zumper. Median rent for a similar home in Las Vegas, meanwhile, is $925 and $945 in Phoenix. Subsequently, more than 23 gas stations have closed in San Francisco since 2010.

There are also 40% fewer gas stations in the city than there were just a decade earlier. Fewer stations mean less access for drivers and a lack of competition among retailers — more than 90% of California’s 10,000 gas stations are affiliated with major corporations, according to a 2015 report from the Los Angeles Times.

Antagonistic To Fossil Fuels

San Francisco, Oakland and San Mateo in California opened lawsuits asserting five oil companies, including Exxon and Chevron, should pay fines for contributing to global warming. Oakland has also sought to prevent energy companies in Wyoming and Montana’s Powder River Basin from transporting their coal from the city’s ports to international markets.

California faces a tough situation if the lawsuits miss their mark. (RELATED: Governor Brown’s Move To Hike California’s Gas Taxes Could Doom Dems As Elections Approach)

Nearly 40% of the state’s crude oil is produced inside the Golden State, even though California lacks refineries. Exxon, Chevron and others being sued will almost certainly pull out of California if the litigation is successful. The oil industry also contributes $66 billion of gross income for 2.7% of the state’s gross domestic product.

State lawmakers are also teeing off against traditional automakers.

Democratic state Assemblymember Phil Ting, for instance, introduced a bill in 2018 that would, if passed, ban the sale of gas-powered cars produced after 2040. He said California drivers must adopt electric vehicles if the state is going to reduce greenhouse gas emissions. Ting wants a full shift to electric vehicles.

Californians haven’t gotten the memo.

Electric vehicle sales in California amount to less than 5% of the state’s overall car sales, despite the state’s title as a champion for the electric vehicle market. Analysts, meanwhile, said the market for these types of vehicles is not anywhere near large enough to overcome gas-powered vehicles. The state’s belligerent attitude toward fossil fuels places a lot of downward pressure on California’s already taxed energy market.

EDITOR’S NOTE: This article was originally published on Oct. 23, 2019. It has been updated to include reports about coronavirus, Russia and Saudi Arabia’s oil recent oil wars, and the drop in oil and gas prices.

67 thoughts on “Here’s Why Californians Are Getting Reamed At The Gas Pump Despite Rock-Bottom Oil Prices

  1. Back in 2018 Democrats killed a bill that would have provided transparency of pricing at the posted pump price, so the public could “see” why Californians pay as much as $1.00 more per gallon of fuel than the rest of the country. The Democratic controlled committee was given the opportunity to support Senator John Moorlach’s bill SB 1074 that would have provided the public transparency of the pricing at the fuel pumps with information showing the various taxes and costs for the numerous environmental rules and regulations.

    The Democrat controlled Senate Committee on Business, Professions and Economic Development did not want the public to know why we’re paying so much and voted to kill the bill from future consideration.

      • I don’t think a popular vote will change anything as Kalifornia is the land of Archie Bunkers meathead model, literally. Dysfunctional and proud of it, feelings over facts, let’s sing kumbya and all go down together. Good riddance. Stay safe.

    • “No Interstate Pipelines And Few Refineries”

      It’s not widely known, but the refineries in California supply’s Nellis Air Force Base, north Las Vegas Nevada, through a pipeline built sometime early in the cold war. It supplied fuel for the entire area including airports.
      As California grew, restrictive laws prevented the expansion of refineries. Even though California pumps plenty of its own oil.
      The oil refineries that supply Salt Lake City and Hill Air Force Base with cheap fuel (oil supplied by isolated Wyoming, Colorado and Utah basin) is now fed through a pipeline to Las Vegas, reversing the flow “from” California too supply fuel from northern Utah “to” Southern California.
      Because of our isolation here in Utah, until the pipeline was built, our fuel prices were the cheapest in the nation. Now fuel prices, due to supply and demand, reflect California’s prices minus the tax. $2.30 A gallon last I Purchased.
      Costco will not buy fuel locally (10 miles away) it uses tanker trucks to ship it 800 miles + from New Mexico and sells it in Utah for $1.99 and makes a profit.
      Much electricity for California is also produced in Utah with our coal.

      • Great Britain, is named because it was the largest, or “Great”, island in the former French province of Brittany. Nothing great about that IMO.

    • The key difference to remember when comparing the US to other countries is that the US is an oil producing and refining country. We succeeded in drilling our way out of subservience to the oil cartel in spite of the last president’s best efforts to keep us under their thumbs. US raw material costs are lower than those in countries which must import crude oil or refined petroleum products.

      California is an oil producing and refining state. California was built on cattle and oil, as well as gold for a few years. Agriculture is still a major contributor to the California economy although Sacramento seems to be determined to drive farms out of the Golden State with a series of horrendous regulatory programs which have jacked up the costs of farm products considerably.

      The last two major hikes in the gasoline tax were passed based on bald faced lies to the people of the California that the money would be used to fix our badly deteriorated highway system. In both cases, the state used the money for other ”important” purposes which had nothing to do with the roads. California used to have some of the best highways in the US, now they are among the worst. Driving on many of our highways these days, I have the distinct impression that I am driving on a suspension torture track.

  2. $US3.21 per US Gallon sounds pretty cheap to me:(

    But then my country has the best spending government in the world and who leans on the taxation of gasoline – (to keep thing going).

    1 US Gallon = 3.75 liters.

    1 liter of gasoline in New Zealand is about NZ$2.00, (although it may be dropping now we are under lock down), which is roughly NZ$7.50 per US Gallon which would cost in US dollars $US4.40 – if my arithmetic is correct.

    Cheers

    Roger

    http://www.rogerfromnewzealand.wordpress.com

      • Zealand is an Island which is part of Denmark. It’s the Island mass where Copenhagen is located, just a cross from Malmo and is what New Zealand was named for.

        • New York was actually named after the then Duke of York who had little to do with either the city or the county. The title has been a royal title since Plantagenet times.

        • “Many of the U.S. “News” are named for U.K. counties/islands”

          Those I knew, just not New Zealand.

          I could have looked it up, I was just making a very tiny joke.

    • And most of that is tax which, magically, disappears in to the consolidated fund. At least the main transport routes down south from Picton are getting a real upgrade since the last big quake.

  3. Luxury, I’m paying £1.85 a litre. Luckily I only drive about 2000 miles a year on my tiny island.

  4. Multiple things wrong with this article:

    “Analysts say the state’s prices will eventually come down to the national average, but it might take some time.”

    California, because of climate scam-related taxes and blending requirements in-state refinery limits, will NEVER come close to the National average unless Californians wakeup and vote the Green-Marxist/Socialists who did that out of office permanently.

    The Blue states are about to experience a very bad fiscal crunch as revenue will not meet projections in June when state budgets are typically done. California, Illinois, Connecticut, Rhode Island state budget planners are about to find out what fiscal austerity is with bad bond ratings in May-June, the next shoe to fall in this COVID-19 economic tsunami.

    That article is from March 28. Mid’3-‘s for oil/bbl is not correct today.
    As of 4 April:
    WTI Crude $24.61 (1 Day Delay)
    Brent Crude $34.11 (1 Day Delay)
    Mars US $24.14 (1 Day Delay)
    Opec Basket $18.93

    The US refiners are mostly paying WTI prices, which is why fly-over America gas is so cheap, while Calistan and the New England socialist states import a lot of their oil from Brent priced dealers.

    • “while Calistan and the New England socialist states….”

      Ironic that Calistan, after years of high taxes, expensive gas and electricity, liberal government and population …. has by FAR the highest GDP in the nation. (number 5 in the world!)

      The GDP of New York is third, just behind Texas. This, without the vast natural resources afforded the latter.

      • Calistan also has the highest poverty and homeless rates in the country. The GDP is largely the result of Gollywood along with a number of high tech companies and wealth is highly concentrated in these industries.

        • Yeah, GDP does not tell the whole story.

          “In order to determine which states are pulling the most weight, WalletHub compared the 50 states and the District of Columbia across 28 key indicators of economic performance and strength. Our data set ranges from GDP growth to startup activity to share of jobs in high-tech industries. Read on for our findings, expert insight from a panel of researchers and a full description of our methodology.”

          https://wallethub.com/edu/states-with-the-best-economies/21697/

          By these metrics, California only came in 4th. The state of Washington, led by Governor Jay Inslee, made the top spot.

          • Yeah, led by Inslee, that’s the ticket. Nothing to do with Boeing or Microsoft. GDP comes from the government dontchaknow?

          • Calistan is still living off of past glory.
            In the past, it was necessary for corporations to maintain their headquarters near each other and near their financial and legal providers.
            That is no longer the case, and major corporations are one by one leaving the high tax and high regulation environments for locations that don’t view them as nothing more than cash cows.

          • Rich Davis,
            “Yeah, led by Inslee, that’s the ticket. Nothing to do with Boeing or Microsoft. GDP comes from the government dontchaknow?”

            Actually, Jay Inslee is a big part of why Boeing decided to stay in Seattle:

            “With the stroke of a pen, Washington Gov. Jay Inslee (D) on Monday signed into law the largest corporate tax break any state has ever given to a single company. And it took just three days of debate in the state legislature to get the measure to Inslee’s desk.

            The new law extends a business and operating tax cut for the aerospace giant through 2040, streamlines the permitting process and invests in a transportation package the company had advocated. Over the life of the package, the deal is expected to be worth $8.7 billion.”

            https://www.washingtonpost.com/blogs/govbeat/wp/2013/11/12/washington-just-awarded-the-largest-state-tax-subsidy-in-u-s-history/?outputType=amp

      • Do the state GDP figures include state spending as part of GDP? If so you have to subtract that out in order to find out what the actual GDP is for the private market – which tells you much more about the actual economy in those states.

      • Technically “taxes” are not included in GDP, but spending of them IS….governments prefer if government spending is a high percentage of GDP to dampen private sector market fluctuations in their economy…..not to mention they all have friends and relatives who want government jobs.

        • Government statistics claim WWII ended the great depression, but that was only by counting federal spending on weapons of war and military vehicles as part of GDP, and by counting troops as employed.
          Note that as soon as war spending ended, and troops became civilians, the recession resumed.
          What really ended the Great Depression was America’s status as world’s leading manufacturer. Our manufacturing exports fueled our recovery from the Great Depression.
          SR

      • Energy analysts a couple of years ago (CNBC) estimated that for every reduction of $0.80 in the price of a gallon of gasoline, the U.S. GDP would increase by one percent.

        Just think how much better California’s economy would be doing if gasoline cost $1.00 a gallon instead of $3.15 a gallon.

        Gasoline taxes hit the poorest people the hardest, and drive up the costs of *everything* in the economy. Gasoline taxes are the worst possible taxes because of the detrimental effects higher prices have on the entire economy.

        Unfortunately, it is easy for politicians to impose gasoline taxes. It’s convenient for them, and they can hide the price increases from the public to a large extent.

        When given a choice, Americans reject higher gasoline taxes.

        • Judging by my recent experience California is not spending all those gas taxes on road improvements

          • One scam the article doesn’t mention is there’s a 18 cent charge for carbon trading, and for some reason, it’s paid twice. The total tax is around 78 cents, but with the carbon trading tax, it’s up to 96 cents. But the state collects it twice, at the refiner and wholesale levels, so the total California tax is $1.14 per gallon. When asked about it, state officials refused to answer.

        • I think the analysis was a lot more than a couple years ago.
          Due to fracking, the production of oil in the US has a greater impact than the damage to consumer disposable income.

        • @Tom Abbott

          “Gasoline taxes hit the poorest people the hardest, and drive up the costs of *everything* in the economy.”

          Yes, I am opposed to taxes where everyone, rich or poor, pay the same rate. Much prefer the progressive, socialist model, where individuals are taxed according to their ability to pay.

    • Joel is correct, but missed another issue.

      California has a Low Carbon Fuels Standard imposed by the California Air Resources Board (CARB) on all fuels. They have mandated that California gasoline and diesel fuel have a “Carbon Intensity” lower than conventional fuels. The target is a 20% reduction in CI by 2030. This is achieved by blending “Renewable” fuels with conventional fuels and using the “lower” CI renewable fuels to generate credits based on the amount of CO2 “Saved” by the renewable fuel. The current price for the “Carbon Credits” is just about $200/metric ton of CO2 whereas Europe is paying $15/MT of CO2. This adds 28 cents to the price of fuel on top of all the additional taxes paid by Californians.

      The article also dose not put the cost of this situation into perspective. California consumes right at 1 million bbl/day of gasoline. That is 15.33 Billion gal/yr. So the $1/gal extra California pays over the national average (which is therefore $1/gal in additional taxes) amounts to a tax on Californians of $15.33B. You have to add diesel taxes to that as well.
      Raw gasoline wholesale price is approximately 57 Cents/gal, so California pays close to $2.50/gal for taxes, distribution, LCFS, and other costs. Part of these costs are the high cost of doing business in California that add hidden costs to everything done in the state. Those are passed along to the consumer as well.
      So, California is a Green Mess and it won’t change until people realize how much it is really costing them to save the planet from 0.0001°F temperature rise.

  5. A somehow tangent question, -Why North Korea enjoys the benefits of extreme automobile scarcity?

  6. That’s a good list of things besides credits (for wind and EVs) they use to rig survival of the unfittest.

  7. One of the reasons why I’m a California climate policy refugee.

    I don’t think it’s refinery capacity. Here in Nevada, while the gas is more expensive than in a lot of the country, it’s significantly cheaper than in California, yet the tanker trucks are coming over the hill from California refineries.

    • California Regular Gasoline is $3.07/gal and diesel is $3.55/gal per DOE EIA data for 23 Mar 2020.
      http://www.eia.gov/dnav/pet/pet_pri_gnd_dcus_sca_w.htm
      The spot price of California RBOB (Reformulated Blendstock for Oxygenate Blending, or raw gasoline) is $0.348/gal. Thus all the renewable fuels and taxes (both direct and indirect) raise the cost of California gasoline to $3/gal. If people realized what the state was doing to them, they would revolt, but no one ever discusses this issue in the open. Where is the Media and Fact Checking?

      • In Truckee/Tahoe City, regular gas at all of the stations is about $3.60 per gallon. A 20 minute drive up I-80 to the first Nevada exit and it’s $1 per gallon cheaper. Go a little further towards Reno and it’s about $1.50 per gallon cheaper.

        Even worse, just the ‘green energy surcharge’ on my final PGE bill was more per KWH than I pay in Nevada and natural gas is 1/2 of the PGE lifeline rate per therm, moreover; there are none of those silly tiers jacking up the price on incremental usage.

        Eventually a lot more Californians will discover the cost of green virtue signaling, especially once the IPCC’s fake science is exposed for the conflict of interest they’re chartered to support.

        • co2isnotevil: Californians have been fleeing their home state for decades. What do they do? Vote for the same type of morons and policies that led to them fleeing their home state. Why do you think some strategist think Texas is turning purple? It’s not because home grown Texans are changing their minds, its due to the influx of those fleeing west (mostly CA) and east coasts nuthouses.

          • The socialist infection is spreading. Too bad there’s not a a vaccine to protect people from letting false hope against imaginary fears turn them stupid. Or does stupid come first, after all, being educated and being stupid are clearly not mutually exclusive as evidenced by the elite among the political left.

      • There’s a price war going on in Parker, CO right now. One station has regular at $1.24/gallon.

  8. I’m wondering how the trucking industry responds to the California $Gas Reaming ? The post doesn’t mention diesel fuel. Many truckers are independent owner operators. Do they try to avoid California routes ? Charge a premium to haul in CA. ? Fill up just outside CA and try to make it out unreamed ?

    • The trucking industry has a real problem with California. If you haul near the cost, your truck has to meet strict pollution standards and to do that, your truck can only be a few years old. Trucks are designed to run anywhere from 500,000 to 1,000,000 miles which means most of the trucks on the road are unable to get near the coast. California costal city’s are paying for this rule with higher freight charges for anything shipped to the coast. The rest of the nation is paying for items shipped to a California port and hauled out of the state by truck. Now if you want to buy a cheap truck with a few miles on it, they are available for a song as they aren’t in great demand.

    • I bought premium gas in Newark, CA on Tuesday for $2.999 per gallon. I drove home to San Luis Obispo to find the same gallon would cost me $3.779.

  9. Damn the torpedoes full speed ahead should not apply with legislation.

    Where in the constitution, that every elected and appointed employee swears to protect, does it say to destroy.

    Handing down one of the basic decisions of U.S. constitutional law, the Supreme Court ruled in McCulloch v. Maryland, back in 1819, that the Constitution exempts the Federal Government from state taxation. Setting forth his renowned dictum that “the power to tax involves the power to destroy,” Chief Justice John Marshall declared that the states (and, by inference, local governments) “have no power, by taxation or otherwise, to retard, impede, burden or in any manner control the operations of the constitutional laws enacted by Congress.”

    When legislators look at their job, to grab power and tax dollars the rights of the people are being abused.
    The general attitude of legislators seems to be there is a tax and regulation out there and we can find it.

  10. To relieve the burden on their citizenry while many of them are under extreme financial duress, all the state needs to do is suspend the rules specifying the blend, and accept any blend that is accepted in a bordering state.

    How hard would that be to do?

  11. With pump prices dropping, there is no incentive to increase refining capacity, which is the bottleneck. Even with pump prices high, there is no incentive to increase refining capacity to deliver gas at a lower price. The artificially high cost for carbon fuels translates to more affordable government subsidized electric vehicles. Given the democratic dominance the state will continue on it’s progressive “death to carbon fuel” spiral while ignoring the true cost to the average useful idiots in the state.

    Killing the US carbon fuel energy sector in this country is a whipped topping on the COVID 19 related impacts to our past economic system. The fall out from this will make the poor decisions following 9/11 to look like genius.

  12. “Democratic state Assemblymember Phil Ting, for instance, introduced a bill in 2018 that would, if passed, ban the sale of gas-powered cars produced after 2040. He said California drivers must adopt electric vehicles if the state is going to reduce greenhouse gas emissions. Ting wants a full shift to electric vehicles.”

    Where are all those electrons going to come from Phil? Where are the rare earth materials required by all the EV’s going to come from Phil?

  13. I paid $1.93 the other day in SoCal. Cash price was $2.23 but I had a 30¢/gal discount from my Vons club rewards. Cheapest I’ve paid in a while. Felt so good to fill up for less than $40!

    Things are a little weird right now. San Diego area usually has very high prices compared to places like Fresno and Bakersfield but some stations in the San Diego area are actually cheaper than the lowest prices in the central valley and similar to prices in Las Vegas and St. George UT.

    The cheap gas is making this lock down that much harder to handle.

  14. Do they get a road network up to par?

    Do electric vehicles pay their fair share?
    Will they one day?

    • California will figure out the formula for taxing drivers per mile driven since it will apply to EVs. This will not stop Sacramento from jacking up gas taxes.

      The question none of the folks who want to convert all cars to EV and home heating and cooking to electric form natural gas have answered, is where is the electricity going to come from when Cali already imports 30% of the electricity is uses today with only a small fraction of drivers in EVs and most homes heated by natural gas. Once the last nuclear power plant in California closes in 2025, California will import nearly 40% of its electricity at today’s usage rates. If they succeed in converted all vehicles to EVs and residences to 100% electric, the imported electricity could easily reach 60% or more.

  15. This is all Socialists know. Fleecing the people for what they can ever lay onto them. But Californians must enjoy that – they continue to vote them into power.

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