In-Depth: Why Californians pay so much more for gasoline, and it's not taxes

Oil prices have doubled in a year. Here's why
Posted at 8:06 PM, Mar 28, 2022
and last updated 2022-03-28 23:55:33-04

SAN DIEGO (KGTV) – The price of gasoline in California has consistently hovered more than $1.50 above the national average.

Refinery costs, gas station fees, and state taxes all contribute to the high price, but the single largest factor is the cost of oil.

The price of oil accounts for 53.6 percent of the final price at the pump, according to the U.S. Energy Information Administration. Refinery costs, gas station fees, and taxes each account for about 15 percent.

Crude oil is the stuff that comes out of the ground. Refineries buy crude to turn it into useable products like gasoline.

Federal data shows the price of crude varies in different parts of the country. California refineries consistently pay more for their barrels of crude than refineries in any other state, a cost which they pass on to consumers.

Over the last four years, California refineries paid 11.5 percent more for crude than the national average, according to EIA data.

So why do refineries pay so much more? It's partly because of where California gets its oil, said UC San Diego energy expert David Victor.

“California gets oil from three places. It gets it from the production of oil here in California, which has slowly been declining over time. It gets it from Alaska, which has declined a lot as the fields in Alaska have tapered off. And then it gets the rest from foreign sources,” he said.

Last year, California got 56 percent of its crude shipped in via tanker from far-flung countries like Ecuador, Saudi Arabia, and Iraq. California refineries almost never buy crude from nearby Texas or the Gulf.

Purchasing oil from Texas or the Gulf would require long trucking routes or trips through the Panama Canal. There are no pipelines connecting California to those oil-rich areas.

“It's cheaper to bring oil from Ecuador than it is all the way from the Gulf of Mexico,” Victor said.

California law mandates that refineries produce a unique blend of gasoline that produces less pollution. The result is that virtually all of California's gas is produced in-state. When a refinery goes offline in California, there are no pipelines to quickly replenish the supply, making the state prone to big price swings.

Over in the Great Plains, federal maps show a dense web of pipelines connecting states with refineries in Texas and the Gulf. Those Great Plains states also have the cheapest gasoline.

So why doesn’t someone build a pipeline to California?

“No one's going to build a big project like that when they think that the future for oil in California is a pretty dim future because we're in the process of shifting away from internal combustion engines to electric vehicles,” Victor said. “That’s the fundamental reason.”

At 53 cents per gallon, California's gas tax is second-highest in the nation. Pennsylvania charges the highest taxes on gasoline, at 58 cents.