Taxes, environmental regulations, and the state’s geographic location all conspire to keep gas costs in California significantly higher than the national average. Los Angeles economics consultant Sung Won Sohn says that California needs a unique fuel blend in order to prevent pollution.
Naturally, he continued, “California is recognized for its high taxes, even on gasoline.” In California, AAA reported that the average price of a gallon of regular gasoline was $5.44 on Tuesday, more than double the national average price of $4.17.
An increase of one cent from Monday, 61 cents from one week ago, and $2 last year have been triggered by an increase in crude oil prices.
According to the federal Energy Information Administration, “California gasoline prices are often higher and more volatile than prices in other states because relatively few supply sources offer California’s unique blend of gasoline outside of the state.
There are three key reasons why the gap between California and the rest of the country is so large:
Taxation
According to the American Petroleum Institute, drivers in California pay 86.55 cents per gallon in state and federal taxes and levies.
This is significantly more than drivers in any other state pay. Illinois comes in second with 78 cents. The average cost of a gallon of gas in the United States is currently 57.09 cents.
In July, Gov. Gavin Newsom has suggested no increase in California’s fuel taxes, which have risen along with the cost of living. Even so, the tax burden has only increased by a small amount.
The per-gallon fuel tax in California increased from 50.5 cents to 51.1 cents on July 1.
There are also federal taxes and fees that must be paid.
Laws pertaining to the environment and other laws.
According to the federal Energy Information Administration, California’s reformulated gasoline program is stricter than the federal government’s.
A lack of supply sources outside of California means that California gasoline prices are often higher and more volatile than prices in other states, according to the study. While the weather in California is forecast to be warmer, a new formula for California gasoline must be used to assist in reducing emissions.
California’s other severe restrictions are also a factor in the hefty price tag. According to Sanjay Varshney, a professor of finance at California State University, Sacramento, “there’s a substantial cost to any restrictions you put in place.” As an example, it is possible for the state to have a greater minimum wage than other states.
Location
The federal Energy Department claims that “California refineries need to run at near full capacity to supply the state’s gasoline demand.” “California’s gasoline prices could rise significantly if more than one refinery experiences issues at the same time.”
Suppliers can take a long time to get to California even if they are located elsewhere on the West Coast or in the Gulf Coast of the United States.
Simply put, running a business in California is more expensive than doing so elsewhere. Varshney opined, “California is just an extremely costly state in general.”