Facts per Gallon

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Why is gas more expensive in California?

GET THE FACTS

Many factors impact the cost
of gasoline in the state.

See the facts below.

20% of what you pay at the pump went to taxes and fees (June - December 2023)

California lawmakers passed a new law last year to collect data to impose price controls on gasoline. 

Seven months of that data has been collected and shows that 20% of what consumers paid at the pump went to government taxes and fees while only 1% was attributable to net profits from the oil industry.

SOURCES:

  1. Average of U.S. Energy Information Administration reported price per gallon for all grades all formulations from June – Dec 2023
  2. This figure represents the average sum of State Excise Tax, State and Local Sales Taxes and State Underground Storage Tank Fee collected by the California Department of Tax and Fee Administration; Low Carbon Fuel Standard based on OPIS methodology; Cap-and-Trade (Fuels under the cap) based on most recent Auction Settlement Price for California Carbon Allowances from for the months of June – December 2023
  3. Average of California Energy Commission reported profits for June – December 2023

Banning gas stations leads to higher prices

As California cities begin to ban new gas stations, what’s the effect on the price at the pump? 

The basic laws of economics tell us the price is set by supply and demand.¹ California already has roughly twice as many licensed drivers per station than the rest of the country.² 

Economists recently proved the impact of more stations creating competition and lower prices, in a specific large market.

SOURCES:

  1. Competitive Effects of Entry in Gasoline Markets”, Energy Institute at Haas, U.C. Berkeley
  2. Federal Highway Administration, Alternative Fuels Data Center, California Energy Commission

Mandated Low Carbon Fuel Requirements

The California Legislature and Governor have given authority to state regulators to mandate requirements on gas designed to lower its carbon intensity. According to the California Air Resources Board (CARB), California’s unique gas adds 11 cents to every gallon sold. And by 2025, CARB expects that cost will increase to 47 cents per gallon.
SOURCE: State of California Air Resources Board Standardized Regulatory Impact Assessment, Sept. 8, 2023

COSTLY CAP AND TRADE

“Cap and Trade” is California’s market-based program to place a cost on emitting carbon. That higher cost is intended to incentivize industry to find the most cost-effective and technologically feasible ways to reduce greenhouse gas emissions to meet the state’s climate goals. This program adds 30 cents per gallon with that cost set to dramatically increase by 2025.

SOURCE: California Energy Commission, OPIS West Coast Spot Market Report, Effective as of 6 November 2023

The government collects a lot

In December of 2023, the State of California imposed $1.15 per gallon on consumers, while oil companies lost 31 cents per gallon of gasoline.

The California
Government Collected

$1.15

PER GALLON

This figure represents the sum of State Excise Tax, State and Local Sales Taxes and State Underground Storage Tank Fee collected by the California Department of Tax and Fee Administration; Low Carbon Fuel Standard based on OPIS methodology; Cap-and-Trade (Fuels under the cap) based on most recent Auction Settlement Price for California Carbon Allowances. All information accessed in January 2024.

The Federal
Government Collected

$0.18

PER GALLON

U.S. Energy Information Administration. How much tax do we pay on a gallon of gasoline and one gallon of diesel fuel? Accessed: January 2024.

Oil Companies
Profited

-$0.31

PER GALLON

 California Energy Commission reported refinery profits for December 2023

THERE ARE MANY TAXES AND FEES

In December of 2023, the $1.33 per gallon in government taxes and fees broke down like this:

SOURCE: California Energy Commission, OPIS West Coast Spot Market Report, December 2023

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See how California compares to other states

Higher taxes and regulatory costs in California result in elevated gas prices when compared to Arizona and Nevada.

The Bottom Line: California policies keep adding
to the price of gasoline.

– Lawrence H. Summers, former US Secretary of the Treasury

“I’m not sure I understand the argument for a windfall profits tax on energy companies. If you reduce profitability, you will discourage investment, which is the opposite of our objectives.”

– Michael Wara, Director Climate and Energy Policy Program
at Stanford University’s Woods Institute for the Environment

“The state really needs to be paying attention to this and see if there are ways we can cushion this impact.”