Why California Gasoline Prices Stay the Nation’s Highest

MIAMI, FL (DTN) — California drivers continue to pay the highest retail gasoline prices in the nation, a trend driven by a tightly constrained supply system, refinery outages and an isolated refining network that leaves the market especially vulnerable to disruptions.

Unlike most U.S. fuel markets, California operates within a largely self-contained gasoline system. More than 90% of the gasoline consumed in the state is produced at in-state refineries that must meet California’s specific environmental standards, according to the California Energy Commission. Imported gasoline and blending components account for just 3% to 7% of supply, limiting the state’s ability to replace barrels quickly during outages.

“The lack of redundancy has become one of the biggest drivers of elevated prices,” a market participant said.

California has 14 refineries concentrated in the Bay Area, Central Valley and Los Angeles, processing more than 1.6 million bpd of crude oil. Eleven major facilities produce transportation fuels that meet California’s reformulated gasoline standards while also supplying most of Nevada and nearly half of Arizona’s demand, according to the CEC. When even part of a refinery goes offline, the impact can ripple quickly through wholesale markets.

“When you lose a refinery or even part of a unit, there’s nowhere to pull barrels from,” the market source said. “You can’t just bring in replacement supply overnight, and that tightness shows up at the rack and eventually at the pump.”

Those risks have resurfaced this month following an ongoing flaring event at Chevron’s 269,000 bpd El Segundo refinery, a key supplier of gasoline into the Los Angeles Basin. Chevron reported the flaring began December 9 with no listed stop time, according to a filing with the South Coast Air Quality Management District. The incident adds to a series of emergency and non-emergency flaring events at the facility this fall.

Unplanned refinery outages remain one of the most significant drivers of gasoline price spikes in California, the CEC has said. Because the state’s fuel market is isolated by both distance and fuel specifications, resupply during outages takes longer and costs more than in other regions, allowing price spikes to persist.

California’s specialized gasoline blend further limits flexibility. While other regions can rely on multiple formulations during tight markets, California has few alternatives.

“Other regions have more flexibility when prices spike because they can lean on different blends,” another market participant said. “Here, E15 isn’t a pressure valve, so when supply tightens, prices move faster and stay higher.”

Crude oil prices also play a role, with global volatility continuing to influence gasoline costs, the CEC said. At the same time, gasoline demand in California has declined since 2017 due to electric vehicle adoption and changes in work patterns, but lower demand has not translated into sustained price relief when supply disruptions occur.

For drivers, the result remains familiar: when supply tightens, California prices rise faster, fall slower, and stay well above the national average; a dynamic market participants say is unlikely to change without major structural shifts.