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California's gas prices top $6 a gallon in October

SACHA PFEIFFER, HOST:

Gas prices remain stubbornly high across the country, so President Biden has announced another release of oil from the country's strategic reserves. Fuel is most expensive in California. Prices there have been hovering around $6 a gallon. That's about $2 above the national average. NPR's Raquel Maria Dillon tried to find out why.

(SOUNDBITE OF PUMP NOZZLE BEING PUT INTO GAS TANK)

RAQUEL MARIA DILLON, BYLINE: Kevin Holmberg (ph) is filling up at a 7-Eleven in Martinez, a city near San Francisco. This is one of the cheapest gas stations in town. Holmberg even found a job doing junk removal closer to home so he can avoid a long, expensive commute.

KEVIN HOLMBERG: Oh, my goodness. That was a stinger. So I actually started working out here. So it - you know, it saves me almost 300 bucks a month.

DILLON: There are several reasons why Californians pay more for gas, says UC Berkeley energy economist Severin Borenstein.

SEVERIN BORENSTEIN: We have a higher gas tax. We have environmental fees, a cap-and-trade program, a low carbon fuel standard, and we use a cleaner-burning gasoline.

DILLON: California has the cleanest gas in the world, he says. At the pump, that adds about 85 cents to the price of a gallon of gas. The drivers I talked to are fine with paying more to reduce smog, but environmental costs don't entirely account for the $2 difference between California gas and the national average. Most refineries outside the state can't meet California's strict anti-pollution standards, and two refineries right here in the Bay Area are switching to making biofuels instead of old-fashioned gasoline. Kevin Slagle with the Western States Petroleum Association, which represents oil refineries, says California's isolated gas market makes it more volatile.

KEVIN SLAGLE: If a refinery needs some maintenance, for example, it's going to affect the market in times of high demand like we see right now.

DILLON: Deonte Reed (ph), who drives for Instacart and was putting $70 of gas in his sedan, doesn't buy that explanation. He thinks the oil companies are taking advantage of the tight market.

DEONTE REED: It could just be a gimmick - something that they just say so that they can keep a little bit of extra money - could be. Is there any way we can figure that out?

DILLON: Borenstein says California's prices got even more inflated after an explosion at a Southern California refinery about seven years ago.

BORENSTEIN: And since 2015, we've averaged an extra 30 cents a gallon higher than you could explain through the taxes, fees and environmental effects.

DILLON: This gasoline surcharge has cost California drivers $40 billion, Borenstein says. If you're doing the math, it doesn't quite add up. There are environmental rules and the refinery explosion, but that doesn't account for every penny of the $2 difference between California and the rest of the country. So the real question is what to do about it. Governor Gavin Newsom wants to tax what he calls the excess profits of refiners and return the money to California taxpayers.

(SOUNDBITE OF ARCHIVED RECORDING)

GAVIN NEWSOM: The fact is, they're ripping you off. Their record profits are coming at your expense.

DILLON: Oil companies complain that'll only make it harder to do business here. That's sort of the point. The state is trying to move its economy to greener fuels to slow climate change. But that transition will be bumpy, with price spikes when the market gets tight, until more renewables come online and more electric vehicles hit the road. In the meantime, compared to drivers in the rest of the country, Californians will continue paying more at the pump. I'm Raquel Maria Dillon, NPR News, Martinez, Calif. Transcript provided by NPR, Copyright NPR.

Raquel Maria Dillon
Raquel Maria Dillon has worked on both sides of the country, on both sides of the mic, at member stations and now as a reporter with NPR's Business Desk. She specializes in making sense of fast moving news stories and translating the intricacies of policy, law and science into plain English.