The price of gas in California is extremely high when compared to the rest of the country. Why is it that the Golden State constantly has the highest gas prices in the country? It isn’t just about our taxes (though there are definitely some of those).
First and foremost, geography has a significant role.
In the words of Patrick De Haan, head of petroleum analysis at GasBuddy: “The West Coast is a little bit like a ‘Petro Island.’ ” Because the Rocky Mountains separate the West from the rest of the country, it is a more condensed and isolated market than the rest of the country.
The lack of a “relief valve,” as De Haan put it, “may result in a price surge on the West Coast when there is an issue.” “If a refinery in the Great Lakes falls offline, gasoline can still be transported to the Midwest by pipeline from the Gulf Coast or the East Coast.”
In terms of relief pipelines, California and the West Coast are virtually non-existent.”
That implies that if something goes wrong – even something as seemingly insignificant as refinery maintenance taking a week longer than intended – prices on the West Coast will be hurt promptly and significantly.
During a record-breaking heatwave in the Pacific Northwest last year, for example, De Haan stated that refinery activities in the region had to be curtailed. It was even this disturbance that contributed to increasing gas prices.
A cap-and-trade program is also in place in California, which requires large greenhouse gas emitters – such as oil and gas refineries – to compensate for their emissions by purchasing carbon credits from a market. In De Haan’s opinion, “it is obviously passed along to the end-user, in this case, motorists.”
California’s Air Resources Board additionally mandates that gas stations in the state only sell specified mixes of gasoline that have been specially designed to reduce pollution emissions. Because that blend is more expensive to create, it results in an additional expense that is passed on to drivers.
Aside from that, there are extra expenses at the pump, such as a carbon offset fee, which De Haan estimates to be approximately 19 cents per gallon.
Then there are the taxes to consider. Each gallon of gasoline in California is subject to a 51.1 cent tax. That’s a significant amount, but not the highest in the country. The state with the lowest gasoline prices is Pennsylvania, at 58.7 cents per gallon.
According to De Haan, when you add up all of the taxes and the carbon management program – whether it’s carbon capture or a tax on gasoline – it all adds up to a substantial sum. The state of California “is in a league of its own since it has its own standards,” says the author.