Study finds California’s high gas prices driven by state policies

• A new study suggests that California’s high gas prices are primarily due to state policies, not price-gouging. Taxes, fees and regulations have driven costs nearly $2 above the national average.
• Strict environmental regulations and the state’s cap-and-trade program contribute to refinery closures and supply shortages, further increasing prices.
• With the highest gas tax in the nation and new clean energy initiatives, the study predicts California’s fuel costs will continue rising, posing financial challenges for consumers.

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California has the highest average gas prices in the country. A recent study suggests that state policies, rather than price-gouging, are the primary factors behind these increased costs.

“It is uniformly acknowledged that California has the most stringent regulatory, some would argue, again, that depending on perspective, either a toxic or visionary environment, for oil and gas companies in the world,” the study reads in part. “Regulatory oversight, irrespective of one’s perspective, are layered into and accumulate throughout the supply change, ultimately adding to the cost burdens of compliance for oil and gas industry operators, which, in turn, contribute to higher consumer prices at the pump.”

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What is contributing to California’s high gas prices?

Research conducted by Michael Mische, a professor at the University of Southern California’s Marshall School of Business, indicates that taxes, fees and regulatory measures imposed by state and local governments are the key contributors to the state’s elevated fuel prices.

The study estimates that these added expenses amount to approximately $1.64 per gallon, significantly impacting California’s current average gas price of about $4.81 per gallon, nearly $2 more than the national average of $3.01.

What do state leaders say is the cause of this problem?

These findings challenge claims from state leaders, including Gov. Gavin Newsom, who has previously pointed to price gouging by oil companies as a major driver of higher fuel costs. However, Mische asserts that California has primarily “self-inflicted” its gas price issues. His research found “no evidence of price gouging, either by gas station owners, refiners or oil producers in the state.”

Which state policies are raising prices at the pump?

Industry experts also highlight the impact of California’s stringent regulatory environment, arguing that it has led to the departure of several refineries from the state, exacerbating supply shortages and further driving up consumer costs.

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The state’s Cap-and-Trade Program, which adds compliance costs for refineries, also contributes to higher fuel prices as refineries pass those expenses on to consumers. Additionally, California imposes the highest gas tax in the country, currently set at 59.7 cents per gallon, with annual increases tied to inflation.

What happens next?

Mische warns that California’s gas prices are likely to continue rising, and the result could be “painful” for many residents of the state, particularly people of “lower income” and “working-class families.”