Why Are California Fuel Prices So High?

California businesses and consumers pay the highest fuel prices in the continental United States.

Several factors contribute to these higher fuel prices, including high demand, limited supply, various taxes and fees, and strict regulatory standards. Let’s look at each factor involved in the price of California’s fuel.

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California Fuel Prices Include High Taxes and Fees

California’s fuel prices are among the highest in the United States, primarily due to the state’s taxes and fees on fuel.

Some of the taxes and fees that impact fuel prices are:

• State Excise Tax
• Federal Excise Tax
• State and Local Sales Taxes
• Cap-and-Trade Program Fee
• Low-Carbon Fuel Standard Program Fee
• Underground Fuel Storage Fee

On average, Californians can expect to pay around $1.25 in taxes and fees for every gallon of fuel they purchase.

California’s Isolated Market Supply and Demand

California operates an isolated fuel and oil market, relying on refineries located in the state. The number of refineries has been declining for several years, resulting in a 66% reduction in crude oil production between 1980 and 20221, while the California population has increased by 64%.2

California’s strict regulatory standards have contributed to the steady drop in the number of refineries. In the early 1980s, California had 43 operating refineries that refined over 2.5 million barrels of crude oil per day. Today, the number of refineries has dropped to 15, refining less than 1.8 million barrels of crude oil per day.3 Of these refineries, 11 of them supply 90% of California’s gasoline and diesel products.

California’s refineries are not supported by any pipelines to receive crude oil from other states. This lack of infrastructure renders the market more vulnerable to price fluctuations.

Strict Regulatory Standards

California has some of the strictest regulations in the world for fuel and oil production. To comply with these regulations, refineries must produce fuel products that meet California’s unique recipes. While these products may be environmentally beneficial, they are costly to refine.

Downs Energy Helps Fight Against Increases in California Fuel Prices

Downs Energy consistently advocates for its customers in an effort to prevent fuel costs from continuing to rise. As a California Fuels & Convenience Alliance (CFCA) member, Downs Energy engages with state representatives and policymakers about the impact their decisions have on businesses throughout the state. Downs Energy also lobbies to support fellow fuel marketers and convenience store operators in the industry.

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