California gas prices decline after governor eases refinery restrictions

California gas prices declined significantly in response to the governor’s waiver approving the early end of its specially formulated summer blend fuel. According to the Energy Information Agency, weekly gas prices in California appear to have peaked with its October 2 weekly report at an average of $6.01 per gallon, compared to a national average of $3.80 per gallon in the same reporting cycle.

The California Energy Commission reports California has an “isolated” transportation fuels market, meaning “gasoline purchased in California is also refined in the state.” With only 14 refineries and new gas vehicles being phased out in the state by 2035, refiners have little incentive to invest in a new refinery, which would cost at least $10 billion, meaning that when two refineries shut down for regular maintenance and two additional unexpected outages at the same time, California underwent a fuel shortage and price increases as gas prices across the nation declined.

California was unable to import oil from the rest of the country due to a lack of physical infrastructure to do so, and the existence of California-specific standards for gasoline. California special blends produce lower emissions than standard gasoline, while the summer blend is more costly than the winter blend due to its ability to reduce smog-causing evaporation.

Over 55% of the crude oil California refineries use to produce the state’s fuel comes from abroad, making California more susceptible than other states to fluctuations in global oil prices. The remainder of its oil comes from California (29%) and Alaska (15%).

California also has the highest combined gas taxes and fees in the nation. On typical gallon of gas, as reported by the state’s energy department on October 16, the state charges a $.58 cent excise tax, $.54 in environmental fees, $.12 in local sales tax, $.02 in state storage fees on top of the federal $.18 excise tax. Approximately $.14 of environmental fees are allocated to the state’s cap-and-trade carbon credit trading program, $.23 to the associated state low-carbon-fuel-standard that researchers say is a regressive tax on the poor, who can’t afford electric vehicles, and fails to reduce carbon emissions.

In California, 99.7% of state and local road spending is funded by gas taxes and other fees paid by drivers.