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Why Are California's Gas Prices So Much Higher Than Every Other State's?

It's not only the state's stringent environmental rules that account for the difference.

Why Are California's Gas Prices So Much Higher Than Every Other State's?

[Photo: Flickr user m01229]

Why are California’s gas prices so high compared to those in the rest of the country? Is it the tough environmental regulation? High taxes? Is it because one of the state’s biggest refineries blew up last year? Yes to all of those, but only partly. To find out the real reason California’s gas prices are, and have been for a long time, the highest in the U.S., one needs to do a little digging.

California’s gas currently costs around $0.50 per gallon more than the national average, at $2.64 for regular. California’s laws account for 30 of those cents, says Priceonomics’ Ben Christopher, but even that doesn't account for the $170-per-year extra that every Californian pays.

The state-added costs are made up of taxes (54 cents on the gallon, ten cents higher than the national average), and California’s cap-and-trade emissions program. California also requires a different gasoline formulation that results in a cleaner-burning fuel but requires special refineries.

But that still only brings us to 32 cents on the gallon extra. The rest of the half-dollar markup comes from plain old import costs. AAA PR director Michael Green told Christopher that, when there’s a problem with one of California’s 17 refineries, gas has to be brought in from the Gulf Coast, because no pipelines run over the Rocky Mountains.

But even California’s gas is cheap compared to Europe's, where a gallon will cost you up to $6.79. That’s the highest current price in Europe, from Norway. But even in Germany, the U.K., and Switzerland, which are in the middle of the European gas price table, you’ll pay around $5.60 per gallon. Think about that next time you fill up in order to drive a half mile to the nearest liquor store and leave your engine running while you run inside for supplies.

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