Gas prices nationwide have soared in recent weeks, partly because of the Russian invasion of Ukraine. For California drivers, the increase is even worse due to what one economist calls the “mystery gas surcharge.”
Severin Borenstein – an energy economist UC Berkeley – said this mysterious fee first appeared in 2015 after a blast at an Exxon Mobil refinery in Torrance, Calif., according to a blog post. He estimates that a spike in prices that year cost drivers in the state an extra $6.7 billion.
Before the blast injured four workers and landed Exxon $566,600 in penalties, California gasoline prices were already higher than other parts of the country due to taxes, fees and other cost factors, said Borenstein.
Kara Greene, a spokeswoman for the Western States Petroleum Assn., said an average of $1.27 of each gallon of gas sold in California goes to taxes, fees and climate programs according to The Los Angeles Times. Around 10 cents of that total on average goes toward state and local sales taxes.
Borenstein said the industry group’s figures appear to be accurate. Extra mystery surcharges come in at branded gas stations, he said.
“The average differential is 7 cents in other parts of the country, and the average differential between branded and unbranded stations in California is 23 cents. That’s data from five years ago, but it makes the point,” he said in an interview Thursday.
Although this mystery surcharge identified by Bornstein began declining after 2015, it increased by a whopping 68% in 2019.
For individual drivers, California’s mystery gas surcharge cost them an extra 46 cents per gallon as of Feb 2020 and contributed to a $1.18 price differential between California and other states, Borenstein said.
As of Tuesday, the national average was around $4.3 per gallon and the average price in California was around $5.7 per gallon, per AAA data. Owners of a Ford F Series – the best-selling vehicle in the U.S. last year, according to Edmunds – with a 23-gallon tank would pay more than $130 for a full tank of gas in the Golden State based on these prices.
“If people were to shop around more and go to those off-brand stations,” Borenstein said, “it would put pressure on the branded stations to lower their price. But Californians seem less willing to do that.”
Indeed, “consumers will pay slightly more per gallon if it means avoiding a U-turn at a busy intersection or not going out of their way,” said Leo Feler, senior economist at the UCLA Anderson Forecast quoted by The Los Angeles Times.
Lawmakers and consumer advocacy groups in California have been trying to find out why gas prices are so high in the state for more than two decades, said the outlet. Recently, they have been focusing on “why name-brand gas stations often charge more than 30 cents more per gallon than stations with less prominent names.”
California Gov. Gavin Newsom asked the California Energy Commission to look into gas prices in April 2019. By that May, state officials said “market manipulation” could be to blame for inflated prices.
When the CEC report released later that year found name-brand gas stations charge “higher prices for what appears to be the same product” and that “if competitors decide collectively to fix prices, this may be unlawful,” Newsom asked then-state Attorney General Xavier Becerra to investigate alleged price fixing and other oil and gas supply industry practices.
Becerra’s office said it would launch an investigation. However, the office of current Attorney General Rob Bonta said it could not comment on the investigation or confirm whether it exists, citing a need “to protect integrity,” according to the Los Angeles Times. Borenstein said the status of the investigation is unknown.
What is known is that the attorney general’s office filed a lawsuit against two energy firms, Vitol Inc. and SK Energy Americas Inc., in May 2020 for allegedly taking advantage of the Exxon explosion in Torrance as part of a scheme “to raise gas prices statewide for their own profit.”
Vitol and SK Energy Americas did not respond to requests seeking comment on the lawsuits, said The Los Angeles Times.
California State Sen. Ben Allen (D-Santa Monica) Friday announced proposed legislation that would require refiners to report how much they pay for crude oil, how much it costs to refine that oil, and the amount of profit they make per gallon of gas they sell.
“What we’re trying to get at is what’s behind this mystery gas surcharge,” Allen said.
Kevin Slagle, a spokesman for the Western States Petroleum Assn., said in an email last week that his organization was “still looking at the bill and may have more specific objections” to it.
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