Gasoline in California Costs an Extra $1.33 Per Gallon

05/20/2019

Gasoline costs a lot in California. For example, the cash-only price at the Sherman Oaks Arco station (a discount brand) is currently $4.10 per gallon. Some of that is environmental regulations, some of that is high real estate prices. But some of the California Premium seems to be that gas prices out here go up fast (e.g., tensions rise in the Middle East: the price per gallon goes up overnight) and down slow. And quite often lately they don’t come down all the way at all.

From Mother Jones:

The Mystery of the California Gasoline Premium Deepens
Kevin Drum

My vacation along the Blue Ridge Parkway has rekindled my interest in a question I first asked a couple of years ago: why is gasoline so expensive in California? Near me, a gallon of regular costs about four bucks right now. But in Virginia and North Carolina, it’s closer to $2.65. That’s a huge difference, and it can’t be accounted for solely by the higher taxes and environmental requirements here in the Golden State. …

Up until 2015, the California premium bounced up and down a little bit but mostly stayed in the range of 30-40 cents. This made sense. … Then, in early 2015, a refinery fire in Torrance took a bunch of production offline and caused a big spike in the premium. This also made sense.

But it took nearly two years for the premium due to the fire to finally wash out. And once it did — long before California raised its gasoline tax — the premium started to shoot up for no apparent reason. It’s continued to increase for more than two years now. This week the premium reached $1.33.

This is nuts. If you put everything together — taxes, smog rules, cap-and-trade, etc. — gasoline in California should cost maybe 40-50 cents more than it does in Virginia and North Carolina. Why is it nearly a dollar more than that?

… This was first highlighted by Severin Borenstein, a genuine expert who’s a former member of the California Energy Commission’s Petroleum Market Advisory Committee. He wrote about it in 2017 and then again in 2018. Even back then he figured the mystery premium was costing California $3 billion per year, and it’s probably doubled since then. Nevertheless, the response was … crickets. Everyone just shrugged and went about their business.

I’ve noted several times that every year, around the time we switch to summer formulations of gasoline, a number of refineries in California seem to mysteriously shut down due to “maintenance” or “accidents” or “labor issues” or some other reason. This causes the price of gasoline to spike, and outside sources usually can’t replace it quickly. …

California uses special formulations of gasoline to fight smog, so if the refineries happen to have little “accidents,” the market can’t legally rush in gasoline from Texas or wherever right away.

But at least this time they’re starting off with the idea that market manipulation might — just might — be part of the problem. And why not? After all, Californians proved long ago that we were suckers for market manipulation by energy companies.

This is a reference to the ridiculous Enron electricity deregulation fiasco of the early 2000s that causes self-inflicted brownouts.

I suspect that part of the problem is that most of the politicians, bureaucrats, and newspapers in California think higher gasoline prices are a Good Thing because they cut carbon emissions and force people to take mass transit instead of driving, but there is only so much they can do publicly to raise taxes. So the oil companies are stepping up and, you know, uh, dropping wrenches into the works that take two months to find, meanwhile causing high prices, but nobody in power calls them on this weird incompetence collusion because they like the results.

[Comment at Unz.com]

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