The Mystery Behind California Fuel Prices

Because of regulations and unique blending requirements specified by stringent laws, California is one of the most expensive places in the world to produce fuel. That’s why, despite oil prices falling around the world, fuel at the pump in California shows little sign of getting cheaper.

According to Reuters, wholesale fuel prices in the Golden State are among the cheapest anywhere. But by the time it reaches the pump, fuel shows no sign of falling like it is elsewhere. In Texas and New York, average retail prices are down a respective 41 percent and 39 percent since mid-2014. Californians have enjoyed just a 32 percent dip in that time.

What gives?

Consumer experts are blaming it on the monopolistic hold refiners have in the state. Refiners like Valero Energy Corp, Phillips 66, Chevron Corp, Tesoro Corp and Royal Dutch Shell Plc control about 81 percent of California’s retail gasoline market.

“The refiners are essentially pumping up the street price because they have a lock over the retail gasoline market. With the prices the weakest in the country, it can’t be those laws. It has to be the pricing behavior,” Jamie Court of Consumer Watchdog, a non-profit advocacy group in Santa Monica, told Reuters.

But successive investigations have found no evidence of supply collusion or price manipulation. Instead, what becomes very clear is that higher prices are being caused by state and federal taxes, as well as fees for cap and trade and low carbon fuel standards in California, which can tack on an extra 63 cents a gallon. That’s the position of industry groups like the West States Petroleum Association.

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