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For years, California leaders accused lipid companies of terms gouging.
Instead, a six-month-long CBS News California probe revealed a analyzable world shaped by authorities policies, refinery closures, and planetary proviso risks that uniquely interaction California's isolated substance market.
What CBS News California Investigates found:
- Why California state costs more: Higher taxes, labour and concern costs, combined with biology programs, regulations, and the state's unsocial substance blend, thrust up baseline prices.
- The governmental communicative is shifting: After failing to beryllium terms gouging — and grappling with the interaction of 2 shuttered refineries — authorities leaders are present publically acknowledging the request to incentivize lipid companies to stay.
- Why refineries are leaving: Rising costs, expanding regulations, semipermanent argumentation uncertainty, and shrinking returns
- Why planetary struggle matters: California's increasing reliance connected overseas refining is expanding volatility — and validating long-standing manufacture warnings that outsourcing refining increases the hazard of terms spikes.
$6 per gallon
California drivers wage the highest state prices successful the nation. As the struggle successful the Middle East increases state prices globally, California state continues to beryllium the astir costly successful the nation, rising supra $6 a gallon.
Last clip state deed $6 a gallon successful California, Gov. Gavin Newsom began accusing lipid companies of terms gouging. California's supermajority Democratic legislature held a taxpayer-funded "price gouging" peculiar session, culminating with authorities that was intended to headdress lipid institution profits and unit them to unfastened their books.
More than 2 years later, authorities officials accidental they recovered no grounds of amerciable terms gouging. Instead, 2 refineries unopen down, taking astir 20% of the state's refining capacity.
California is present outsourcing to Asian refineries to marque much of California's peculiar state blend. Environmental standards aren't arsenic strict successful Asia, and the refiners person to vessel the state backmost to California halfway astir the world. In summation to accrued pollution, transporting state crossed the Pacific tin instrumentality weeks, which bureau heads and lipid manufacture executives hold leads to delays and proviso volatility, expanding the hazard of terms spikes during section refinery outages oregon planetary shortages.
The existent Middle East struggle is highlighting the concern, arsenic China has already stopped exporting substance owed to shortages successful Asia. Meanwhile, the lipid manufacture argues that projected regulatory changes could marque it much costly for lipid companies to proceed refining successful California, yet incentivizing outsourcing much refining.
Why state already costs much successful California
Even earlier caller refinery closures and the planetary conflict, California drivers paid the highest state prices successful the federation for respective reasons.
Roughly 45% of the outgo of each gallon of state is made up of costs that are accordant crossed the country. That includes the planetary terms of crude, which is higher for everyone close now, and an 18-cent national taxation that drivers wage successful each state.
However, the remaining 55% of each gallon of state includes California-specific costs.
Distribution and refining costs, which are much costly successful California, relationship for astir 28% of each gallon.
California's peculiar state blend tacks connected astir 10-15 cents per gallon to refining costs. Then there's a 61-cent authorities excise taxation and astir 2 cents attributed to underground retention fees.
California's cap-and-trade tacks connected astir 23 cents to each gallon, and the Low Carbon Fuel Standard (LCFS) adds different 14 cents.
On apical of that, determination are authorities and section income taxes.
At $6 per gallon, that adds up to an further $20 each clip you capable up an average-sized tank.
Here's a existent breakdown of California-specific costs per gallon:
Sales taxes (2%)
- State income tax: 2.25% average
- Local/special territory taxes: 1% average
State clime programs (10%)
- Cap-and-Trade: 23 cents
- Low Carbon Fuel Standard: 14 cents
Base taxes and fees (15%)
- State excise tax: 61 cents
- Underground retention fee: 2 cents
Refining (13%)
- CA peculiar state blend 10-15 cents
Distribution (15%)
Federal taxation (5%)
Crude lipid costs (40%)
UC Berkeley economist Severin Borenstein says there's besides thing harder to explicate — a persistent "mystery surcharge." That unexplained gap archetypal appeared astir 2015, pursuing a large refinery outage, and has remained ever since.
While regulations and taxes acceptable the baseline, Borenstein says terms spikes are often driven by proviso disruptions, particularly successful California's isolated substance market.
Refiners constituent to higher operating costs successful California — from labour to vigor — and accidental overmuch of the added outgo occurs aft substance leaves the refinery, astatine the organisation and retail level.
Borenstein notes that this was existent earlier the enigma surcharge appeared successful 2015.
Price gouging
For years, state leaders blamed lipid companies for precocious state prices and launched a taxpayer-funded terms gouging peculiar league successful 2023.
The league culminated successful two caller price-gouging laws. One instrumentality created caller oversight, requiring lipid companies to unfastened their books and giving regulators much visibility into refinery profits and operations. Another capped refinery nett margins during terms spikes, though that instrumentality has since been paused.
But aft 2 years, authorities officials accidental they recovered nary grounds of amerciable terms gouging.
California's Natural Resources Secretary Wade Crowfoot said the authorities identified factors down terms spikes, but stopped abbreviated of blaming lipid companies for price gouging.
"We've identified definite dynamics that were creating those terms spikes," Crowfoot said.
Pressed connected whether determination was impervious of terms gouging, Crowfoot added that helium would not "be successful a presumption to constituent a finger."
That marks a displacement from years of governmental messaging that placed superior blasted connected the lipid industry.
CBS News California Investigates reached retired to the Governor's Office and the California Air Resources Board, which regulates galore of the policies the lipid manufacture opposes. Both declined interrogation requests.
The medication alternatively pointed to Crowfoot, who emphasized the authorities is trying to equilibrium affordability with semipermanent clime goals.
Refiners reason those policies could backfire.
Tolly Graves, manager of the Chevron Richmond refinery, said nett caps disregard however volatile the concern is:
"Those bully months are the lone mode we marque a profit… if you headdress the bully months but don't enactment the atrocious ones, it creates an unviable business," Graves said.
Why refineries are leaving
Following the terms gouging session, 2 large refineries — Valero successful the San Francisco Bay Area and Wilmington Phillips 66 successful the Los Angeles country — person unopen down, taking hundreds of jobs and astir one-fifth of the state's gasoline accumulation with them.
That nonaccomplishment tightens proviso successful a authorities that already operates arsenic what experts picture arsenic an "energy island" — with nary large pipelines bringing successful gasoline from different states.
Fewer refineries mean little in-state accumulation and much unit connected prices, particularly during outages oregon precocious demand.
Inside the Richmond Chevron, 1 of California's remaining refineries, manufacture leaders pointed to the outgo of doing concern successful the state.
"California is simply a pugnacious spot to bash concern for refiners," Graves said.
Every day, the Chevron refinery produces capable state for 1 successful 5 cars successful Northern California and astir 60% of the pitchy substance from Sacramento to San Jose, which costs much to marque successful California than anyplace else.
Graves said higher labor, energy, and regulatory costs each lend to higher accumulation expenses that are yet passed connected to drivers.
California's cleaner-burning, peculiar blend of gasoline besides requires specialized production.
"Only a fistful of refineries extracurricular of California tin really marque California gasoline," said Brian Hubinger, elder manager of Chevron authorities affairs. He noted that accumulation of the peculiar blend "took billions of dollars of investment."
Those requirements, combined with semipermanent uncertainty astir the state's modulation distant from fossil fuels, person made it harder for companies to warrant continued investment.
"It costs america hundreds of millions a twelvemonth conscionable to enactment successful business," Graves said. "Things person to alteration for america to beryllium consenting to put successful a refinery successful California."
Growing reliance connected overseas fuel
As refining capableness declines, California is progressively turning to overseas refiners, peculiarly successful Asia, to marque California's peculiar blend.
While they tin nutrient California's low-carbon gas, overseas refiners don't person to adhere to the aforesaid strict biology standards arsenic California's refineries. In summation to section pollution, the gasoline they nutrient is shipped crossed the ocean, which biology bureau heads admit is besides worse for the environment.
"There is little contamination associated with the gasoline that's produced successful California," Crowfoot said.
Additionally, tankers coming from Asia tin instrumentality weeks to get successful California, creating caller vulnerabilities. That hold means immoderate disruption — from refinery outages to planetary conflicts similar the war with Iran — tin rapidly tighten proviso and thrust up prices.
Asia is presently struggling to proviso its ain markets. China, successful particular, has already restricted exports.
Still, vigor analysts enactment planetary markets thin to set implicit clip — adjacent if short-term disruptions tin pb to impermanent terms spikes.
"If a refinery has a occupation they didn't anticipate, that's going to spike prices, that's going to wounded Californians, and it's going to beryllium 3 weeks earlier we tin get resupply from determination else," said Andy Walz, president of Chevron.
A displacement successful the governmental conversation
After years of focusing connected lipid companies, authorities leaders present accidental the speech is evolving.
"I've been talking astir this for years, OK? What it took was 2 refineries to close, and past they said, 'Oh, possibly they're not terms gouging,' " Walz said.
Lawmakers are present weighing however to equilibrium clime goals with the request to support a unchangeable and affordable substance proviso to powerfulness the present.
"That was astir apt the opening of the displacement erstwhile that study came backmost and Gov. Newsom couldn't beryllium that there's terms gouging," authorities Senator Brian Jones (R-San Diego) said.
California has temporarily suspended a caller terms gouging instrumentality that would person capped however overmuch lipid companies tin marque during terms spikes. Though refineries accidental it's inactive connected the books, and they pass that projected changes to California's Cap-and-Invest programme could marque it cheaper to refine state overseas alternatively than present astatine home.
"I deliberation if the voters fig retired that the occupation is policy, they're going to say, 'Hey, I shouldn't beryllium paying this much. Why is Nevada a dollar cheaper?' Walz said. "Voters tin alteration that outcome."
The statement present isn't conscionable astir who's to blame, but however California manages the modulation without driving up costs successful the abbreviated term.
For commuters similar Sirena Lopez, who drives 2 hours each mode for work, the interaction is immediate.
"There was 1 clip I filled up astir $100… and I was like… I don't cognize what I'm doing close now," she said.
Even arsenic prices rise, request remains dependable and drivers proceed to consciousness the strain.
As California pushes toward a cleaner vigor future, the cardinal situation up is not conscionable reducing emissions, but ensuring substance remains reliable and affordable successful the meantime.
The politician appoints bureau leaders and helps signifier California's vigor and biology policies — decisions that straight interaction state prices.
With a caller politician acceptable to beryllium elected, those policies — and the outgo of state — could soon change.
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