IER: Newsom’s California Gasoline Price Gouging Assertion Is a Myth

[Note: This piece is from the brilliant analysts and pros at the Institute for Energy Research, an energy think tank based in Washington, DC.]

Key Takeaways

1 - Despite years of allegations of “price-gouging” by refiners in California by Governor Gavin Newsom, data collected by legislation shows refiners there operate on razor-thin margins and, at times, operate at a loss.

2 - The actual “price-gouger” in California, where gasoline prices exceed the U.S. average by well over $1 a gallon, is the State of California, which makes $1.40 on every gallon. In contrast, refiners averaged 9 cents over the period analyzed.

3 - The state’s policies are leading to refinery closures, which will drive up prices, but the state’s response is to add more red tape and to see if the state can import its unique blend of gasoline from abroad.

4 - The state is also looking into running its own refineries.

5 - Newsom may be more interested in driving oil, gas, and jet fuel from his state and forcing the adoption of less capable technologies than in reducing the price of fuel for consumers.

California Governor Gavin Newsom claims oil companies are price gouging, which is why gasoline prices are well over $1 more than the national average price in his state. As of Jan. 16, 2025, Californians pay an average of $4.416 a gallon for regulated unleaded gasoline, while the nation averages $3.103 a gallon. To prove his assertion, in 2022, Newsom signed SB-1322, the Oil Refinery Cost Disclosure Act, requiring refiners in California to report detailed monthly data on their gasoline profit margins. Refiners had to disclose the cost of the oil purchased, the wholesale price of the gasoline sold, and the gross and net profits earned per gallon of refined gasoline. The data that the California Energy Commission collected found that oil refiners often operate on razor-thin or even negative profit margins. The real reason that Californians pay the highest prices in the nation for gasoline is because of the state’s climate-justified taxes, fees, regulations, and special gasoline blends no other state requires.