Why is gas so expensive in California?

Why is gas so expensive in California?

Regular gasoline prices eia, 2013When people talk about gasoline, it’s usually because prices have dropped — or skyrocketed. But with prices remaining between $3.90 and $4.10 per gallon in California for most of 2013, there hasn’t been much noise about gas prices. (As of Monday, the average price for a gallon of regular stood at just $3.56. It typically drops in the fall.) However, there is an interesting trend underlying the generally stable gas prices; and it’s one that might upset some consumers in the Golden State.

Typically, a gallon of regular gasoline costs between 30 and 35 cents more in California than it does in other parts of the country. However, throughout the summer and fall, that difference per gallon has reached up to 50 cents. So why exactly has the price of gas up more in California?

To start, California uses a different formula for its fuel. Environmental regulations require that the gas here must burn cleaner than in other states. In fact, California has some of the strictest pollution standards in the nation. The cleaner-burning gas is more expensive to produce, so California sees an increase in prices of about 10 to 15 cents per gallon.

On top of the more expensive fuel come California’s gasoline taxes — the highest in the country. (New York was ahead last year, but California caught back up.) Drivers in the state pay around 72 cents per gallon of local, state and federal gasoline taxes. Other states have less than half of that burden.

Growing gap

Those factors — taxes and environmental regulations — have always affected gas prices, though. So why is the gap growing?

From SFGate:

This summer, several developments helped widen the gap between gas prices in California and the rest of the country.

The state’s excise tax on gasoline increased 3.5 cents per gallon on July 1, as part of an annual adjustment required by state law.

Refineries elsewhere in the country were churning out copious amounts of gasoline, more than drivers needed. And in some regions, refineries were able to take advantage of the surge in U.S. oil production triggered by hydraulic fracturing.

Although oil is priced on the global market, the U.S. surge has happened so quickly that the country lacks the pipelines needed to move all that oil to the coasts. So refiners in some places, such as the Midwest or the Rocky Mountains, have been able to buy “stranded” oil at a discount.

For example, Rocky Mountain refineries paid $96.63 per barrel of oil in August, according to the U.S. Energy Information Administration. During the same month, California refineries paid $108.05. With no oil pipelines connecting California to other states, refineries here often pay more for petroleum than do their counterparts elsewhere. The difference rises and falls over time.

Finally, several California refineries experienced technical problems this year that trimmed their production, said Gordon Schremp, senior analyst with the California Energy Commission. But the state’s current gasoline inventories are normal for this time of year, he said.

The good news is that gas prices will probably continue to slump for the remainder of the year. The bad news is that they’ll slump back down to what is considered inexpensive only in California.

25 comments

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  1. LetitCollapse
    LetitCollapse 21 November, 2013, 12:36

    Let’s analyze this.

    In Dec. 2008 a consumer could buy a gallon of gas @ about $1.75/gal in So. California. Today (Nov. 2013) a consumer pays about $3.60/gal and many people would tell you to fill up at that bargain price. The difference in the pricing being $1.85/gal.

    Now let’s examine the price of a barrel of crude oil. In Dec. 2008 a barrel of crude oil cost about $40. Today in Nov. 2013? About $107/bbl. Of course this is before domestic taxes or costs associated with refining crude into useable car fuel or the costs of environmental regs are tacked onto the price.

    So the price of a gallon of gas for the consumer increased by about 51% over that time period. And the price of a barrel of crude increased by about 62% over that same time period. So the % increase of crude prices exceeded the % increase of refined and taxed car fuel by 11%.

    So isn’t that strange? The price of crude oil increased at a faster rate than the price of a gallon of gasoline even with increased domestic taxes, regulatory requirements and refinery costs tossed into the mix. One would expect the exact opposite if domestic add-ons were the primary cause of higher car fuel prices, right?

    This should alert you to the power of a foreign cartel that controls any commodity that you need for your day to day survival.

    We knew about this back in the early 70’s when there was an oil embargo and people had to wait in line at the gas station on even/odd days for hours to fill up. Frustration levels were so high that people were being shot for cutting in line. And we were promised by our leaders that they would reduce our dependency on foreign oil. Despite the fracking – our dependence is greater today than ever. They still have us by the short hairs. That’s because your corporate oil giants own your politicians. That’s the reason nothing has been done to solve the problem. The ones making all the money off it don’t see it as a problem. They see it as a windfall. And since they control the purse strings their will trumps yours.

    So let’s put this all into perspective. I don’t like higher taxes or more draconian regulations any more than you do. In fact, I despise them. But I refuse to use taxes or regulations as a scapegoat for a corrupted industry that has it’s boot placed firmly on the back of our necks. Just like the medical industry does.

    Reply this comment
    • S Moderation Douglas
      S Moderation Douglas 22 November, 2013, 10:11

      How does it affect your analysis if you go back to July of 2008 instead of December?

      Gas prices were $4.11 per gallon and crude was $147 a barrel. 

      In that case, gas prices have dropped 12% while crude fell 27%. 

      Seems like there are a LOT of factors affecting gas prices, some of which we will never know. 

      Reply this comment
      • LetitCollapse
        LetitCollapse 23 November, 2013, 11:13

        I double checked the current price for a barrel of crude oil. It’s not $107. It’s more like $95. So that changes the above calculation somewhat. The price of a gal of regular gas from Dec. 2008 to today still went up by about 51% ($1.75 to $3.60) in California. Crude went up by about 58% ($40/bbl to $95) instead of by 62%. But still a 7% difference, meaning that the rate of increase was 7% more for crude than for regular gas. So the premise still stands.

        Ok. Let’s choose your preferred date. July. 2008 instead of Dec. 2008. If you go back, you would see the price of regular gas in California in July. 2008 was about $4.50/gal. Not $4.11 as you claimed. But you got the price of crude right – $147/bbl.

        Ok. So from your preferred time frame the price of gas came down from $4.50 t0 $3.60. A $0.90 drop. A 20% decrease. Crude oil fell from $147 to $95. A $52 drop. A 35% decrease.

        Wouldn’t you expect gas to fall at a steeper rate than crude if the domestic add-ons were the cause of the higher gas prices?

        Oh, and you will note that in the 5 year chart for gas prices in California that the price started it’s upward slope in 11/2008 – right after the meltdown. The sole reason for this was the massive infusion of fiat bailout dollars into the system which drove prices up largely through inflationary pressures. The economy was dead. People were losing their jobs by the millions. Commerce slowed down considerably. So ask yourself “Why would gas prices rise in this meltdown environment?”

        It’s very sad today that people consider $3.60 gas a nice bargain. Just goes to show that if the frog remains in the pot on the stove long enough as the burner get turned up slowly – that submission always follows.

        Reply this comment
  2. LetitCollapse
    LetitCollapse 21 November, 2013, 16:04

    Have you ever noticed that the gas price on the poor side of the tracks in your respective counties are usually significantly lower (4%-5%) than they are if you buy gas in the rich part of town, even though they might only be 5-7 miles apart? Why should that be in a free-market economy? How could that relatively short distance economically justify a 4%-5% price discount? It can’t. It’s just another defacto tax on people who have more money. Why do they do it? Because you pay it without question and they can. That’s why.

    Have you ever wondered why a small asian fish market in a lower-middle class neighborhood can sell you fresh whole salmon for $2.50/pound when that same salmon would cost you $6-$8 a pound at your chain market that buys in huge bulk supplies from the seafood distributors? Isn’t that strange?

    Californians pay more for gas than, let’s say, Idahoans because Califonians have a 23.8% poverty rate and a huge bureaucracy. Somebody has to finance the care for that massive impoverish population and financially support that bureaucracy which goes with it. Those EPA employees have to eat too and earn pension credits for retirement @ 55. Without all the regulations and laws to enforce – they’d have to find real gainful employment. That would be a hardship.

    Reply this comment
    • John Seiler
      John Seiler 21 November, 2013, 16:31

      That one’s easy. If you drive a 1995 Taurus, you’re price conscious on gas. If you drive a new Rolls, what do you care if you pay 50 cents more a gallon?

      Reply this comment
      • LetitCollapse
        LetitCollapse 21 November, 2013, 17:15

        But why should one man get charged more for any product just because he has more money to spend in a free economy? Sure, we have a progressive tax system and I understand that. There is some semblance of logic there. But why have a progressive pricing system in an alleged free economy? Why shouldn’t all consumers just be required to carry a color coded card which identifies their income brackets and then the store clerk either adds a surcharge or subtracts a discount off the marked price depending upon how much one earns?

        Instead of awarding price breaks or imposing surcharges geographically – why not just be honest about it and do it across the board using a color coded card?

        Reply this comment
        • John Seiler
          John Seiler 21 November, 2013, 22:14

          Not sure of your meaning.

          Reply this comment
          • LetitCollapse
            LetitCollapse 21 November, 2013, 23:47

            Why should a person get charged more or less for gasoline based on whether he lives in a rich, middle class or poor zip code in a free enterprise system? It’s common for the price of gasoline to be priced significantly higher in a rich zip code (West LA) than in a poor zip code (East LA) even though only a short distance of travel may separate the two areas. I understand progressive tax systems. And I agree with progressive taxation to a point. I just don’t understand discriminatory pricing systems that, in part, set gas prices based on the socio-economic status of a certain zip code. Apple doesn’t price their iPods that way. Why should the oil companies price gas that way? To respond to your previous comment, should a low-income ’95 Taurus driver who is cost conscious but happens to rent in a rich zip code get surcharged on gas by virtue of his choice of residence? And should the Rolls driver who chooses to live in East LA get a price break on his gas when he couldn’t care less about spending $0.50 more per gallon?

            The colored coded card example was sarcasm to drive home the point.

            Even in socialist western europe the price of gas is virtually the same whether you buy it in a poor district or a rich district of a city.

            I’m only emphasizing that America is becoming more and more one of those “from each according to his ability – to each according to his need” nations by the day. That’s not what made America a recognized superpower.

          • John Seiler
            John Seiler 22 November, 2013, 09:19

            I don’t think there are too many Rolls drivers in East L.A.

          • LetitCollapse
            LetitCollapse 22 November, 2013, 11:37

            Of course that’s not the point here. But let’s play. Are you saying that if there were more Rolls Royce owners living in East LA that it would be fine for oil companies to charge them more the identical product that the ’95 Taurus owner puts in his tank? Now I’m confused.

            Let’s go back to the color-coded card that I alluded to in my 11-21, 5:15pm comment. Would you be in favor of that?

            Interesting discussion.

          • John Seiler
            John Seiler 22 November, 2013, 11:55

            Put your card analogy again if you want me to comment on it; I can’t see it. On your other points:

            “Why should a person get charged more or less for gasoline based on whether he lives in a rich, middle class or poor zip code in a free enterprise system?”

            Because it is a free-enterprise system. I live in Huntington Beach, where the local pump prices are among the lowest around. But I sometimes go to Newport Beach, where the stations on PCH and around Fashion Island charge a premium. The real estate there costs more, as one commentator noted. And the stations are in much better condition. The rich locals, as I indicated, also don’t mind paying more. It’s a prestige thing; or maybe they might meet a new billionaire business partner at the pump. They could drive 5 miles to fill up in HB with the hoi polloi, but they don’t want to. It’s like how an upscale restaurant will charge more for the same beer than a local dive.

            Of course, most rich folks in NB probably fill up at the cheap places in HB or Costa Mesa. But enough buy the high-priced gas near the coast to make those stations prosper.

            “It’s common for the price of gasoline to be priced significantly higher in a rich zip code (West LA) than in a poor zip code (East LA) even though only a short distance of travel may separate the two areas.”

            Short distance geographically, long distance demographically.

            “I understand progressive tax systems. And I agree with progressive taxation to a point.”

            I don’t.

            “I just don’t understand discriminatory pricing systems that, in part, set gas prices based on the socio-economic status of a certain zip code…. Why should the oil companies price gas that way?”

            See the above. The prices at the pump are determined by local market conditions, which include in many cases local owners of the stations.

            “Apple doesn’t price their iPods that way.”

            That’s because Apple has almost total control over their distribution network. And at this point, rich folks don’t even have iPods, but iPhone 5S’s. By contrast, my $99 Android from Target — I’m not sure even who manufactured it — is cheaper than the $700 Samsung Android a rich person buys at Fashion Island. And I can’t afford an iPod.

            “To respond to your previous comment, should a low-income ’95 Taurus driver who is cost conscious but happens to rent in a rich zip code get surcharged on gas by virtue of his choice of residence? And should the Rolls driver who chooses to live in East LA get a price break on his gas when he couldn’t care less about spending $0.50 more per gallon?”

            The Taurus driver would make sure he filled up at a cheap gas station. For example, if you drive away from pricey PCH in Newport Beach, about 2 miles up Newport Blvd., then Harbor Blvd. in Costa Mesa, you find cheap gas stations. The Rolls driver thinks, “I’m not going to go out of my way, and don’t want to mix with the hoi polloi at the Tesoro station.”

            The Taurus drive thinks, “I’ll make sure I fill up at the cheap station the next time I’m driving up Harbor.”

            “Even in socialist western europe the price of gas is virtually the same whether you buy it in a poor district or a rich district of a city.”

            I don’t know about that situation. I was in the U.S. Army in West Germany from 1979-82, but the U.S. taxpayers paid for the gas and diesel in our jeeps and trucks.

            “I’m only emphasizing that America is becoming more and more one of those ‘from each according to his ability – to each according to his need’ nations by the day. That’s not what made America a recognized superpower.”

            But wouldn’t price differentiation by location — of which there isn’t that much, really, just in the richest areas — be part of a free society, not a socialist one?

          • LetitCollapse
            LetitCollapse 22 November, 2013, 13:08

            “Because it is a free-enterprise system.”

            I guess we disagree on what a ‘free enterprise system’ is.

            Governments generally charge those who wealthier more (in taxes) to subsidize those who are not so well off. And when government talks about another increase in taxes many at this website go through the roof.

            Yet, when a corporation conveniently charges people who live in better neighborhoods more for the same product to subsidize those who happen to live in poorer neighborhoods – all the sudden it’s called ‘free enterprise’. Oh sure, those who live in better neighborhoods are ‘free’ to drive to poorer neighborhoods to fill up. But then that’s not really being ‘free’, is it? It’s imposing an inconvenience on those who live in a well-to-do neighborhood (even though they might be poor too!) to get the same product at a lesser cost due to their choice of residence. That’s not ‘free at all. enterprise’.

            “Short distance geographically, long distance demographically.”

            I thought you were an advocate of flat-taxes? You know. Where everyone pays the same tax rates. Yet you are in favor of paying a higher rate for your gas than someone in a more challenged demographic class? Should Apple charge less for it’s iPad’s in East LA than in West LA? It stands to reason that you would be in favor of that too since you seem to have no problem with the discriminatory pricing of gasoline. How about big screens, refrigerators, stoves, washing machines, beds, living room furniture, etc…. Should be have discriminatory pricing based on choice of residence for all those items too in our ‘free enterprise system’

            “The prices at the pump are determined by local market conditions, which include in many cases local owners of the stations.”

            I suggest you talk to a gas station owner near Fashion Island and ask him why he and his neighboring gas stations charge much more per gallon than the owner of a gas station in Santa Ana. Ask him whether he is free to set that price or whether he is charged more for the gas that he buys from the distribution network and must charge a normal mark-up to stay in business (just as the Santa Ana gas station owner must do). Ask him whether his mark-up is greater than the mark-up applied by the Santa Ana station owner.

            “The Taurus drive thinks, “I’ll make sure I fill up at the cheap station the next time I’m driving up Harbor.”

            Point missed. That places an inconvenient hardship on the low-income Taurus owner who happens to rent in a higher income neighborhood. He should be able to fill up around the corner at the same price he could on Harbor in a ‘free enterprise system’. He shouldn’t get punished economically for where he chose to make his home. That is not ‘free enterprise’. That’s a form of socialism.

            Let me go back to the example of the color-coded shopping card that would identify consumers by their income brackets. Would you be in favor of that? Let’s say 5 different colors. And when you went to the register the clerk either rang up a surcharge or a discount OFF THE MARKED PRICE based on which color-coded bracket you fell into? How would that really be much different that discriminatory pricing by class of neighborhood?

            “I don’t know about that situation. I was in the U.S. Army in West Germany from 1979-82, but the U.S. taxpayers paid for the gas and diesel in our jeeps and trucks.”

            Not referring to the US Army. I was referring to the european economy. The gas prices there were indistinguishable among the rich or poor neighborhoods.

            “But wouldn’t price differentiation by location — of which there isn’t that much, really, just in the richest areas — be part of a free society, not a socialist one?”

            No. You mentioned Orange County. South Orange County gas prices are significantly higher on average than Central Orange County gas prices. All of South OC is not ‘rich’. Yet they are made to subsidize the people living in Central OC by corporations. I would expect that behavior by a government. Not a corporation. That is not a ‘free society’.

            I respect your responses. Many website hosts wouldn’t engage in such a discussion. Thanks.

          • John Seiler
            John Seiler 22 November, 2013, 15:05

            Actually, this is how it works. I often go to the Arco on the corner of Adams and Beach in Huntington Beach. It’s the cheapest around. It’s always crowded. I worry about someone ramming me, or dinging my car. Sometimes I have to wait five minutes to get a pump. I feed my $20s into the machine to avoid a Debit Card charge. Sometimes I pay inside, where place isn’t all that clean. The macadam needs repair. They get high volume, so often there’s a gas truck I have to maneuver around. Everybody else is rushed, like me. This is the Arco – AmPm, 19971 Beach Blvd @Adams Ave, Huntington Beach, CA 92648

            Price today on GasPriceWatch.com today for 87 octane: $3.36.

            A couple of years ago I was at one of the high-priced stations by Fashion Island. Not for gas, but to get a bottled water. Nobody was there. When people are there, the car aisles are wide. The pavement is smooth and recently redone. Inside the gas station, everything was shiny and clean. Of course the main payment is with credit cards. This was Chevron (#93042), 1550 Jamboree Rd @San Joaquin Hills,
            Newport Beach, CA 92660.

            Price today on GasPriceWatch.com for 87 octane: $3.64.

            So, for 28 cents more you get the nice treatment. You get what you pay for.

            If I was worth a couple million bucks, would I choose the higher-priced Chevron over the Arco to fill up my new Merc S600? You bet.

          • LetitCollapse
            LetitCollapse 22 November, 2013, 15:29

            That’s nice anecdotal information, John. But all gas stations in these areas that vary in economic status do not fall into your simple example. This would be a more common example: There are sleazy gas stations in Newport Beach and then there are pristine gas stations in Santa Ana. Yet the sleazy one in NB would charge you more than the pristine one in SA. Why? Location. You would get charged more for the same gas by an inferior station in a rich area than by a pristine one in a poor area. How would you explain that? That’s certainly not ‘free enterprise’ at work. Is it?

            I think you know what I mean. On average, gas prices are significantly higher in rich areas than poor areas. The wealthier areas seem to subsidize the poorer areas. I thought we reached that conclusion earlier in our discussion. But this seems to be an extension of government practices in form of taxation and redistribution of wealth. Something that this website has routinely rails against. So now I’m confused.

          • John Seiler
            John Seiler 22 November, 2013, 15:53

            It’s not anecdotal. I gave you the numbers.

            I give up.

          • LetitCollapse
            LetitCollapse 22 November, 2013, 16:05

            So do I.

            But thanks for the discussion anyway despite many of my previous points going unaddressed.

        • GregS
          GregS 22 November, 2013, 07:44

          It’s called a free market and retailers can charge what the market will bear, and obviously a rich part of town can afford more for gas.

          Reply this comment
          • LetitCollapse
            LetitCollapse 22 November, 2013, 11:04

            No. Call these what they are: Subsidies in a so-called free market economy.

            Even the real socialists in europe don’t do that.

            The rich already pay large subsidies. They are generally called ‘taxes’. But these are imposed by governments, not corporations. Big difference. When corporations start imposing defacto taxes on the people we’re in big trouble. Can you say ‘bailouts’ and ‘QE’? So they take trillions of your tax dollars to keep from going under – and then they turn around make you pay a subsidy surcharge for their product based on your lot in life.

            Never thought I’d come across so many socialists on a conservative website.

        • EastBayLarry
          EastBayLarry 22 November, 2013, 07:58

          Have you considered that the gas station in the ‘poor’ part of town may have a significantly lower rent payment? In this respect it is a ‘free market’ in that the ‘rich’ are free to fill up in the poor part of town and the ‘poor’ are equally free to pay more by visiting the ‘rich’ gas station.

          Reply this comment
          • LetitCollapse
            LetitCollapse 22 November, 2013, 11:20

            That makes no sense. One pays less for housing in a poor community because real estate prices are lower in a poor community. It’s a less attractive place to live for a variety of reasons and residences are older.

            Gas is the same wherever you buy it.

            And to respond to your point, why not charge more for gas in a poor area and the poor could fill up in the rich area? Would that be fair in a so-called free market? So why would the reverse be ok with you, Larry?

            Why shouldn’t Apple charge less for their iPods in East LA than in West LA, Larry? If gasoline is subject to discriminatory pricing – why not do it for everything?

  3. Queeg
    Queeg 22 November, 2013, 09:50

    I hope the gas prices “tank” in poor areas, so greedy doomers drive to these many areas and rub shoulders with the poor ravaged by pillager globalists.

    Power to the People Bro!

    Reply this comment
  4. doug
    doug 22 November, 2013, 11:02

    i had read/heard somewhere that the price of gas increased despite the usage declining in past couple years. state revenues declined and hence, they had to raise the price to make up the difference. you pay more, you get less.
    its the basic fundamentals to socialism and the over-government spending.

    when the state starts talking about charging per mile driven, its going to get uglier. people will use less, pay more for items shipped (like UPS) and yet the price of gas will rise. you’ll be stuck on a bus wondering what happened when diane feinstein will be limo’d to the capital.

    you’ll be better off riding a horse to work and getting credit for “alternative transportation” programs that give you incentives to not drive to work.

    you’ll probably make better time too. and the evironmentalists will love you.

    Reply this comment
  5. Ulysses Uhaul
    Ulysses Uhaul 22 November, 2013, 22:39

    This thread broke the record for verbose discourse…..who reads this stuff?

    Reply this comment
  6. Mark
    Mark 14 March, 2015, 12:56

    On a recent trip I could get diesel for almost 50 cents less per gallon in Nevada than California. Boutique fuels are an expensive joke.

    Reply this comment
  7. Ex Democrat
    Ex Democrat 4 February, 2018, 11:28

    Lack of anti-trust enforcement (monopolistic pricing) Add to this the most inefficient government in America having to add huge taxes on top of the already inflated price to subsidize government mismanagement such as huge pension scams for their members. Some of them earn more in retirement than when they worked full time.

    Reply this comment

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