California’s average price for a gallon of regular unleaded was $4.34 on Feb. 1, the day after Valero began to unwind its refinery. By Feb. 8, consumers were paying on average $4.46 a gallon, the steepest price in the country.
Correlation without causation? Possibly. Last year California’s average price increased by 3 cents a gallon from the last week in January to the first week of February, then grew another 14 cents from the first week of February to week No. 2.
But there will be no coincidence when prices rise later in the year, potentially blowing through previous records. University of Southern California professor Michael Mische believes refinery closures — Valero’s Benicia facility is not the only one scheduled to cease operations in the state — could force prices to $8 a gallon this year, maybe even higher. That would be more than $1.50 a gallon beyond the highest average ever seen in the state: $6.44 a gallon in June 2022.
California’s punishing gasoline prices are not due to bad luck. They are the residue of public policies that have strangled the energy sector. Energy Secretary Chris Wright quipped last month that “Thanks to Gavin Newsom’s America last energy agenda, California gas prices are nearly 50% higher than the national average.” Newsom is not responsible alone for the state’s soaring energy prices — his poor stewardship was preceded by policymaking decisions that go back decades. Though it has the fifth largest oil reserves in the country, “in-state crude oil production has fallen over 68% since 1991.” Lawmakers have virtually chased the industry out of the state.
But Newsom has done little over his seven years in the governor’s seat to roll back prices, and it’s easily argued that he’s actually made matters worse.. He called a special session to threaten oil companies over high prices, which not just was ineffective, it was counterproductive. A “price gouging” bill Newsom asked for and signed has not moderated prices, nor has the watchdog created by the bill who was tasked with forcing prices downward had success. The governor’s panicked response to the loss of oil refineries has gone nowhere, but to his credit, he has signed legislation that at some point might be useful.
Despite all the activity from the governor’s office, gas prices still remain far higher than the national average. The gap has hardly budged over the past year, from $1.68 a gallon to $1.66 a gallon.
The state has become, apparently by design, an “energy island,” where the only gasoline that can be sold in the state is made nowhere else but California. While this blend burns cleaner, it’s also more expensive to produce. When motor fuel can’t be “imported” from other states to meet demand, supplies will inevitably be constrained and prices will respond by increasing. This dynamic will grow worse as more refineries go dormant.
Taxes, at nearly 72 cents a gallon, the highest in the U.S., also contribute to the pain. So does the state’s heavy regulatory burden, which includes Sacramento’s cap-and-trade program and the low-carbon fuel standard that, together, boost prices by 54 cents a gallon. Threats from the governor’s office to dictate prices and curb industry profits are also part of the problem.
California consumers need relief from stiff energy prices across the board. Policymakers will eventually make changes — but only when voters begin to hold them accountable.
Kerry Jackson is the William Clement Fellow in California Reform at the Pacific Research Institute and co-author of The California Left Coast Survivor’s Guide.
