Growing up in California in the 1990s, I remember noticing gas prices along the drive to school. Any time the signs showed more than a dollar a gallon, we would hear the late great Bob Edwards on my parents\u2019 car radio, interviewing energy experts on NPR\u2019s \u201cMorning Edition\u201d about why costs were so high and when they\u2019d come back down.<\/p>\n
Now, as a professor of energy politics at UC Santa Barbara, I\u2019m asked the same questions. Students, my family, government leaders and journalists covering the race for governor<\/a> all want to know: Why are gas prices so high here in California? And how can we lower them?<\/p>\n Anyone who has taken an economics class would tell you about the law of demand<\/a>: If you reduce how many people want something, its prices go down. If people use less gas, it will get cheaper. My research<\/a> shows that the best way to do this is by investing in public transportation and walkable neighborhoods. Think of transit solutions like L.A.\u2019s \u201c28 projects by 2028<\/a>\u201d initiative.<\/p>\n We can also reduce demand by adding more electric vehicles into the market and by replacing old gas-powered vehicles with more-efficient models. In fact, California has already cut annual gasoline consumption by 13%<\/a> since 2019. But cars and trucks take years to replace. In the meantime, demand-side strategies are not enough on their own to meaningfully curb prices at the pump.<\/p>\n What about the law of supply? If we produce more of something, prices go down. But that works only in a competitive marketplace. And right now, California\u2019s gasoline market is far from competitive. Refineries turn crude oil into gasoline and other products. And just four companies hold 90% of California\u2019s refining capacity<\/a>, giving them tremendous market power. Our gasoline market looks more like OPEC<\/a> than like Adam Smith\u2019s vision of competition. To reduce prices through the supply side, we need to make that supply more competitive. Three strategies can help us get there.<\/p>\n First, we need to open up California. To break the cartel-like power of California\u2019s refineries, we need to make them compete. This means importing more gasoline from outside<\/a>, which would force in-state suppliers to match the (typically lower) prices from out-of-state suppliers in Texas or South Korea. This would also help backfill lost production<\/a> from refinery closures<\/a>. There also would be a climate benefit from opening up our markets: refineries outside California are processing less carbon-intensive<\/a> crude oil, emitting less climate pollution per each gallon of gas. And existing regulations<\/a> can ensure imports meet the state\u2019s high environmental standards.<\/p>\n Second, we need to root out hidden prices. On average, gasoline prices in California have been 41 cents per gallon higher<\/a> than the rest of the country even after accounting for state taxes and environmental programs. This premium even has its own nickname: the \u201cmystery gasoline surcharge<\/a>.\u201d Three years ago, lawmakers created an independent division<\/a> to oversee fuel markets. We already understand that supply disruptions aren\u2019t the only reason for price spikes; the state\u2019s gasoline market is under-regulated<\/a>. There are too many dark corners in which companies can hide charges. The new independent division gives the California Energy Commission new tools<\/a> for oversight, but lawmakers should bolster funding to shine more light on the murky practices that enrich companies at the expense of California drivers.<\/p>\n Third, we need to tackle price discrepancies between distributors. Not all stations charge the same for a gallon of gas. As Gov. Gavin Newsom\u2019s administration has noted \u2014 both formally<\/a> and in meme form<\/a> \u2014 brand-name stations such as Arco, Chevron and Exxon Mobil charge higher prices compared with those not under a name brand. The new independent division also found that high branded prices are unique to California. Lawmakers should closely scrutinize these high prices and consider competition-based solutions to defeat them.<\/p>\n Notice what\u2019s not on this list: pumping more oil. In-state oil production has little to do<\/a> with high gasoline prices. The global oil market, including global refining volume, sets the price you pay at the pump<\/a>. It won\u2019t be affected by the well down the street. California\u2019s oil production has been naturally declining<\/a> since 1986. And since the late 1980s, California has been importing<\/a> more crude oil than it produces. That doesn\u2019t explain why our gasoline prices are higher: They didn\u2019t begin to diverge from the rest of the country\u2019s until 2015.<\/p>\n Also not on the list is state control over refineries. This idea has cropped up across California<\/a> in the hopes of keeping aging refineries open. But decades of research, including my own<\/a>, has shown that state ownership in the oil industry leads to inefficiency<\/a> at best and corruption<\/a> at worst. State-owned oil companies tend to pursue the industry\u2019s interests<\/a> rather than the government\u2019s goals. This means more business as usual \u2014 and not just for prices, but also for the climate<\/a>.<\/p>\n So how do we lower gasoline prices? In the long run, the answer is clear: reduce demand through electric vehicles and better public transit. But in the meantime, we need to open up California\u2019s gasoline market and break apart the political stranglehold of the state\u2019s oil industry. What we don\u2019t need are half-baked answers such as increasing California\u2019s oil production or putting refineries under state control. Those ideas simply ignore the research and the data. As Bob Edwards used to say on \u201cMorning Edition\u201d back in the \u201990s, \u201cA little learning is a dangerous thing, but a lot of ignorance is just as bad.\u201d<\/p>\n Paasha Mahdavi is a professor of energy and environmental politics at UC Santa Barbara, where he directs the Energy Governance and Political Economy lab.<\/p>\n Insights <\/p>\n L.A. Times Insights<\/a> delivers AI-generated analysis on Voices content to offer all points of view. Insights does not appear on any news articles. <\/p>\n Viewpoint This article generally aligns with a Center point of view. Learn more about this AI-generated analysis<\/a> Perspectives <\/p>\n The following AI-generated content is powered by Perplexity. The Los Angeles Times editorial staff does not create or edit the content.<\/p>\n Ideas expressed in the piece<\/p>\n The high cost of gasoline in California is not attributable to insufficient in-state oil production, as the state has been naturally declining in oil output since 1986 and has imported more crude oil than it produces since the late 1980s.<\/p>\n Instead, California\u2019s gasoline market lacks competition, with just four companies controlling 90% of refining capacity and operating with cartel-like market power, a structural problem that distinguishes the state\u2019s market from competitive national dynamics.<\/p>\n The immediate approach to lowering prices should focus on supply-side solutions that increase competition, beginning with importing gasoline from outside California to force in-state suppliers to match lower out-of-state prices from producers in Texas or South Korea.<\/p>\n Market oversight must be strengthened to address the unexplained \u201cmystery gasoline surcharge\u201d that has kept California gasoline prices approximately 41 cents per gallon higher than the national average even after accounting for state taxes and environmental programs.<\/p>\n Competition-based strategies should target price discrepancies between branded stations such as Arco, Chevron, and Exxon Mobil and non-branded competitors, as this pricing disparity appears to be unique to California.<\/p>\n Long-term demand reduction through electric vehicle adoption and public transportation investment offers a sustainable path forward, with California already reducing annual gasoline consumption by 13% since 2019 and achieving record electric vehicle market share of 29.1% in 2025.<\/p>\n Different views on the topic<\/p>\n The closure of in-state refineries represents a critical supply problem that will inevitably drive prices upward, with Valero Energy and Phillips 66 shutting down facilities that together supplied approximately 17% of the state\u2019s gasoline, fundamentally constraining supply capacity[1]<\/a>.<\/p>\n Environmental and regulatory compliance costs, including California\u2019s Low Carbon Fuel Standard and requirements for special fuel blends meeting strict state environmental rules, have made refinery operations in California less profitable and feasible compared to importing refined products[1]<\/a>.<\/p>\n Gas prices in California are projected to increase substantially, with analysts forecasting potential surges past $5 per gallon or even reaching $7 to $8 per gallon by the end of 2026 as the state loses nearly one-fifth of its oil refining capacity[1]<\/a>[2]<\/a>.<\/p>\n Regulatory cost components embedded in California\u2019s fuel standards, while designed to reduce carbon emissions and improve air quality, directly contribute to the state\u2019s price premium and represent a significant structural cost that consumers bear at the pump[2]<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"Growing up in California in the 1990s, I remember noticing gas prices along the drive to school. 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