New Study: ‘California’s High Gas Prices and Supply Dilemmas are Self-Inflicted’

A new study by USC Professor Michael Mische found that the factors which have contributed to California’s high gasoline prices over 50-years are self-imposed by state officials and politicians. It turns out that California is its own worst enemy.

Today, I paid $5.15 per gallon of gas in Sacramento, while the AAA national average is $3.078. In Texas today, a gallon of gas will cost you $2.45 to $3.29 – the average in Texas is $2.68. As Professor Mische notes in his study, “Since January 1995 through January 20, 2025, Californians have been paying, on average, 13.1% more for their gasoline than the rest of the nation. Not surprisingly, the average price of retail gasoline in California on March 11, 2025, was $4.694 a gallon, or 52.35% higher per gallon for all formulations than the national average price for gasoline at $3.081, according to AAA.”

It is no secret that California is its own worst enemy. There have been articles exposing this for decades, and now we have 50 years of irrefutable data thanks to Professor Mische. Oil and gas and California refiners “have not engaged in widespread price gouging, profiteering, price manipulation, ‘unexplained residual prices’ or surcharges, magical or otherwise.”

However, Governor Gavin Newsom, who is currently preoccupied with his new vanity podcast may want to consider talking to oil and gas industry officials – something he has failed to do in his 6 years as California’s governor.

There is no excuse for Newsom’s negligence of an industry which is an economic powerhouse in the state, providing hundreds of thousands of jobs, over $50 million in paychecks to workers, and billions in state, local and federal taxes.

The oil and gas industry contributes hundreds of billions of dollars to the state’s economy and Gavin Newsom won’t talk to them. Instead Newsom is regulating the viability out of California’s oil and gas industry.

While Newsom prioritizes climate change schemes at the expense of the oil and gas industry, a timely report by the Los Angeles Economic Development Corporation (LAEDC) report reveals the significant role oil and gas plays in California’s economy.

The report found that:

• Across California, the oil and gas industry supports 536,770 jobs, generates $53 billion in labor income, and contributes $166 billion of economic activity to California’s Gross State Product (GSP).
• Additionally, it generates $47.9 billion in state and local taxes and $16.3 billion in federal taxes.

The oil and gas industry is an economic powerhouse, and Gov. Newsom and his handlers want to shut it down and run it out of the state.

Los Angeles Economic Development Corporation reports that “the oil and gas industry contributes hundreds of billions of dollars to the state’s economy. This economic activity supports critical public programs such as health care, public safety, and education.” 

These factors are crucial to consider as the state continues to push for policies that advance the energy transition, especially with programs like Medi-Cal being underfunded.

Professor Michael Mische offers the following conclusions in his study on 30 to 50 years of data on California’s high gas prices:

“…the primary conclusion from this study is that California’s high gasoline prices and supply dilemmas are, by design, engineering or serendipitously, largely self-inflicted, and the result of directed policies and a litany of regulations, taxes, fees, and costs. The economic evidence is abundant; California refiners have not engaged in widespread price gouging, profiteering, price manipulation, “unexplained residual prices” or surcharges, magical or otherwise. The Golden State’s gasoline price dilemma is the result of the complex interactions regulatory and political policies, and the subtleties of refinery operations and global crude oil prices and in-state centric supply and demand. Specifically, California’s high gasoline prices can be attributed to:

1. Aggressive environmental policies, which are layered on the oil and gas industry, add costs throughout the petroleum supply chain resulting in higher retail gasoline prices.
2. Costly reporting and compliance to regulatory and environmental mandates are added to the retail price of gasoline, including California’s special blend gasoline requirements, the highest state excise tax in the U.S., as well as growing cap and trade costs, local taxes, and other environmental program costs, thereby increasing consumer prices at the pump.
3. In-state business general operating and refinery costs are which are considerably higher in California than across the U.S., are reflected in the retail price of gasoline.
4. Declining in-state oil production and increasingly greater reliance on foreign sourced imports and exposure to geopolitical conditions contribute to supply concerns and retail price volatility.
5. Refinery gasoline production, which is decreasing at a faster rate than gasoline consumption, creates stresses on supply gasoline stocks, thereby contributing to higher consumer prices.
6. Increasingly higher taxes and policy and regulatory costs, such as cap and trade, gasoline inventories, and the LCFS,  which are influencing the exit of refiners from the Golden State adding to supply stresses, and price volatility, influence retailing pricing strategies by operators.
7. General disincentives associated with Governor Newsom’s mandate and California Air Resource Board’s (CARB) 2035 objective to eliminate internal combustion vehicles (ICV) in favor of zero-emission vehicles (ZEV) as a method to force consumer adoption of ZEVs through gasoline costs serve to dissuade new operators from entering the California market and motivate existing ones to exit.

“With 2035 less than a decade away, there is no incentive for or benefit to California oil producers or refiners to invest in additional capacity or capital improvements in the Golden State,” Professor Mische writes. “Ultimately, with the potential for the loss of two or more major refineries, combined with new special blend gasoline standards (LCFS) and the new finished gasoline stock inventory requirements, Californians are inevitably facing escalating gasoline prices at the retail pump, and most likely, increased taxes and fees to compensate for lost gasoline and cap and trade revenues.”

“According to California’s own Legislative Analyst’s Office (LAO), greenhouse emissions policies have contributed to the second highest monthly electricity rates for residential service in the U.S.,” Prof. Mische says. “For the 2019 to 2024 period, the LAO reports that residential electrical utility rates in California increased by 47%. In the Golden State, Californians monthly utility bills average $438.”

California oil imports from petrostates such as Saudi Arabia and Iraq have increased significantly, as a consequence of declining in-state oil production, because of Gov. Newsom’s and Democrats’ in the State Legislature’s aggressive anti-oil policies.

Prof. Mische says California is highly dependent on oil imports from Iraq (21.26%), Brazil (20.41%), Guyana (15.80%), and Ecuador (13.60%).

Is anyone surprised when we have lawmakers like State Senator Scott Wiener authoring legislation which will hold “Big Oil” responsible for natural disasters in California. And in doing so, he will allow insurance companies and victims of fires, floods, rain and sleet, wind events, mudslides, and earthquakes to sue fossil fuel companies for damages.

In 1982, California imported 5.6% its crude oil from foreign sources. In 2024, the Golden State imported 60.7% of its oil from foreign sources, largely because of open hostility from the Newsom administration and demented lawmakers like Senator Wiener.