Newsom’s gas price crusade morphs into bid to keep refiners open

Earlier this week, I pulled my 24-year-old SUV into a Sacramento gas station for its weekly — more or less— fill-up. It was 14.5 gallons at $4.05, plus the ever-mysterious 9/10 of a cent, per gallon.

I could have gone to a nearby Chevron station, but it wanted $4.59 a gallon and would have cost me about 8 bucks more.

While California’s gas prices are among the nation’s highest, thanks largely to the state’s hefty taxes and regulatory costs, they vary widely from station to station, even among those under the same ownership.

This variance complicates the obsession that California’s motorists and politicians have with gas prices.

California’s nearly 30 million cars and light trucks travel 340 billion miles each year and burn more than 13 billion gallons of gas, costing $60.7 billion in 2024. That’s a big number, certainly, but not a huge factor compared to other costs of living in California, particularly for housing.

Gas prices get so much attention, one suspects, because filling the tank is a frequent ritual that requires drivers to stand there while the pump’s dial spins through gallonage and dollars.

Gov. Gavin Newsom spent much of 2023 and 2024 on a crusade against high gas prices, accusing refiners of gouging motorists. He called a special legislative session and signed legislation to create more oversight.

“They continue to lie, and they continue to manipulate,” Newsom said exactly one year ago. “They have been raking in unprecedented profits because they can.”

Last month, the newly created Division of Petroleum Market Oversight released its first annual report.

There weren’t any smoking guns. Mostly the report merely confirmed what was already known — that prices are much higher than those in other states, that most of the price differential is due to taxes and regulatory costs and that there’s a “mystery surcharge” that cannot be attributed to any quantifiable factor — a phenomenon first identified eight years ago by UC-Berkeley Professor Severin Borenstein.

The surcharge has averaged 41 cents a gallon in recent years, and the report declares that “the cumulative impact of this surcharge is substantial, costing California consumers over $59 billion in extra payments for gasoline between 2015 and 2024.”

It suggests that it represents extra profit for refiners but is not definitive. It also acknowledges that “certain refiners, however, may only be marginally profitable outside of price spikes. This is partly because refiners’ operating expenses in California and the West Coast, while generally stable since 2014, are higher than in the rest of the U.S, in part because of higher labor and energy costs.”

In other words the surcharge could just reflect that doing business in California is more expensive than in other states.

“This is validation that Californians have been getting hosed at the pump for decades because too few refiners make too much of our gasoline,” said Jamie Court, president of Consumer Watchdog, which had backed Newsom’s crusade.

Having only a few refiners does contribute to the price picture, as does the state’s unique smog-fighting gasoline formula and the lack of pipelines to import fuel from other states.

In fact, after Newsom’s legislation passed, two refiners announced plans to shut down, leading to speculation that gas prices could hike to record levels due to shrinking supplies.

One might have expected that Newsom would jump upon the report as validation of his price-gouging accusations. But the report didn’t make that conclusion, and the governor has since changed his tune and is trying to stave off refinery closures.

Newsom also is drawing fire from Court, who complains that the “Newsom Administration took off the table valuable tools to combat this price gouging when it froze the price gouging penalty rules that it asked the legislature to create in 2023.”

That was then. This is now.