Gov Newsom claims Big Oil is to blame for high gas prices, but new report blames climate policies

California Democratic Gov. Gavin Newsom has continuously denied that the state’s policies have anything to do with sky-high gas prices the state's residents pay, arguing that it’s “Big Oil” driving up gasoline prices. But a new study shows policies have added as much as $1.91 per gallon to what Californians pay at the pump.

According to AAA, Americans on Saturday were paying on average $3.177 a gallon for gasoline. Californians were paying $4.676 per gallon on average. The gap can vary. A year ago, the average national price was $3.814 per gallon, while Californians were paying $6.059 per gallon. 

According to the Energy Policy Research Foundation analysis by researcher Max Pyziur, California has several policies impacting gasoline prices that are entirely unique to the state. 

In the 1960s, California began targeting gasoline formulations, which created blend requirements exceeding those of the EPA. According to the fondation analysis, this requirement alone adds 16 cents a gallon to the price of California gas on average. 

The blended gasoline, called California Reformulated Gasoline Blendstock for Oxygenate Blending (CARBOB), is only available from in-state refiners. The California Energy Commission put together a report in August warning that the state’s remaining refineries will close as a result of the commission’s projected decline in demand for gasoline as a result of electric vehicle adoption, which the state is mandating.

The report proposed the state purchase and operate its own refineries, but it also proposed the state develop relationships with out-of-state suppliers to ship CARBOB into the state to secure a reliable supply of California gas.

The foundation report pointed to two other environmental policies driving up gas prices in California. The first is California’s Cap and Trade program, which aims to reduce greenhouse gas emissions statewide. The state caps emissions, and the caps have steadily increased since the program was first enacted in 2006. Major emitters have to obtain allowances for every ton of greenhouse gasses they emit, and companies buy and sell these allowances on a market.

The second policy driving up California’s gas prices is the state's Low Carbon Fuel Standard, enacted in 2011. The standard targets the carbon intensity of transportation fuels, which includes gasoline. And like the Cap and Trade program, the standard grew more stringent over time. Combined, the two policies, according to the foundation, increased gas prices by 10 cents a gallon in 2004. By 2024, the additional cost was 52 cents per gallon.

On top of the policies is California’s excise tax, which was 18 cents per gallon in 2000. That increased to 58 cents per gallon in 2024.

The foundation report states the premium Californians pay for their climate-friendlier gasoline prices over that of the average American was $1 during 2022 and 2023. Its peak was $1.91 per gallon on Oct. 3, 2022. This year, it has hovered around 90 cents per gallon.

Newsom has responded to the state’s high gasoline prices by arguing that oil companies are bad actors and need further regulation. 

He set out to hold them accountable for alleged price gouging with an anti-price gouging law. He also proposed a law that would require refineries to store a certain amount of product to stave off any price spikes resulting from drops in supply. The California legislature has been reluctant to rapidly pass the bill, and the governors of Arizona and Nevada signed a letter warning California the law would result in supply shortages and increased gasoline prices.

Refineries and oil and companies have responded to the state's regulations by doing less business in the state. The number of refineries went from 43 in 1982 to just 14 this year. Chevron announced in August it was moving its headquarters to Houston from San Ramon, California.