California’s New Gas Regulations Set to Drive Up Fuel Prices

Legislation in California is poised to significantly impact fuel prices for consumers, as a series of regulatory measures are set to close gas stations and increase costs. The new law, known as Senate Bill 445, mandates that gas station owners with single-walled underground storage tanks must either close or replace these tanks by December 31, 2025. The impending deadline could lead to a noticeable reduction in the number of gas stations, creating greater challenges for drivers seeking refueling options.

The implications of SB 445, signed into law by former Governor Jerry Brown in 2014, are now becoming apparent. Many current lawmakers may find themselves distancing from the consequences of this law as they respond to constituents concerned about the loss of local gas stations. The closure of these facilities is expected to result not only in fewer options for consumers but also in increased gas prices. With reduced competition and higher compliance costs likely being passed on to customers, California drivers could face a significant financial burden.

Impact of Recent Refinery Closures

In addition to the impending closure of gas stations, the decision by oil companies to shut down refineries further complicates the situation. Phillips 66 plans to close its Los Angeles refinery by the end of 2023, followed by a Valero refinery in Benicia, scheduled to shut down in April 2024. These closures are anticipated to exacerbate the rising fuel prices that Californian consumers are already experiencing.

The actions taken by current Governor Gavin Newsom have drawn criticism as he initiated two special legislative sessions aimed at regulating oil companies. The first session, held in 2023, resulted in the passage of Senate Bill X1-2, which established the Division of Petroleum Market Oversight within the California Energy Commission. This division was tasked with overseeing market practices and ensuring consumer protection regarding transportation fuels.

In 2024, a second special session led to Assembly Bill X2-1, which focused on reducing gasoline price risks. This legislation empowered the California Energy Commission to set maximum profit margins for gasoline refiners and mandated new data collection to identify potential market manipulation.

Higher Costs and Consumer Burden

As California grapples with its energy policies, a recent report from the Division of Petroleum Market Oversight indicates that the state’s approach may be contributing to higher fuel prices. The report highlights a “mystery surcharge” that has led to gas prices rising by an average of $0.41 per gallon between 2015 and 2024. The DPMO also acknowledged that California has fewer refineries compared to other states, resulting in a concentration of market power that increases prices.

Moreover, the report noted that operational expenses for refiners in California are significantly higher than in other regions, largely due to elevated labor and energy costs. Despite these findings, the report did not recommend a review of state policies that impact energy expenses, such as the gasoline excise tax and cap-and-invest programs.

In summary, the legislation and regulations currently in place are creating a complex landscape for California consumers. The financial burden of increased gas prices due to fewer gas stations and refinery closures ultimately falls on the shoulders of the public, whether as consumers, ratepayers, or taxpayers. As the state pushes for a transition away from petroleum, the implications of these policies will continue to unfold in ways that affect daily life in California.