Equilibrium & Sustainability

Why gas is so much more expensive in California than in Texas

Gas prices are soaring across the country, but drivers are paying more to fill up tanks depending on their state and area code.

As of Friday, California has clocked the highest prices at the pump, while Texas has seen some of the lowest.

Californians are paying about $2 more for a gallon of gas than Texans — $5.68 and $3.78, respectively — according to transportation company AAA.

Here is why gas prices are so much higher in the Golden State compared to the Lone Star State:

Oil production

The West Coast has notoriously high gas prices in part because the region is considered a fuel island.

California is cut off by the Rockies mountain range from the oil market in the east. The state instead relies on international imports via the Panama Canal, which connects the Atlantic Ocean to the Pacific Ocean.

California imports more than 70 percent of its crude oil supply, mostly from foreign sources, according to the Western States Petroleum Association. The state has about 14 of its own refineries, but in-state oil production decreased 27.9 percent in the last decade.

By contrast, Texas is the largest oil producing state in the country, producing more than 4 million barrels of oil a day, according to the U.S. Department of Energy (DOE).

Texas leads the nation in oil refining and has 31 petroleum refineries across the state, according to the DOE. More than one-fourth of the nation’s 100 largest oil fields are located in Texas, and the state hosts one-third of the U.S. total refining capacity.

Texas is also well-connected to the rest of the country.

Among oil-producing states, California actually ranks seventh, producing 341,000 barrels of oil a day. But the DOE reports the state’s crude oil production has steadily declined since 1985.

Gas taxes

Texas has one of the lowest gas taxes in the country compared to California, which has the second highest in the U.S.

The gasoline tax in California is about 51 cents, according to a January report from the Federation of Tax Administrators.

California raised its gas tax last summer to combat high inflation. Lawmakers also raised the state’s gas tax by 12 cents in 2017 to pay for infrastructure, environmental projects and upkeep.

In Texas, the gasoline tax is 20 cents, one of the lowest in country.

Texas has kept its low gas tax at the same price since 1991, according to the state comptroller’s office, which noted that most Texans would not support an increase in motor fuel taxes.

California also has the Cap-and-Trade Program, which contributes to the state’s high prices at the pump, according to Patrick De Haan, the head of petroleum analysis at Gas Buddy.

The program, designed to limit greenhouse gas emissions, covers about 85 percent of the state’s emissions, or about 450 energy companies across the California.

Greenhouse gas emitters whose products emit above the state limit have to purchase credits, and this cost trickles down to consumers, equating to a roughly 20 cents per gallon increase for residents.

“Oil companies have no ability to absorb the cost, which is tremendous,” De Haan told The Hill. “So it’s funneled down to the consumer.”

Fuel type

California also uses more cleaner-burning fuel, which can be harder and more expensive to get in times of increased demand.

To meet cleaner emission standards, California requires motorists use a special blend of motor gasoline called California Reformulated Gasoline.

That can lead to issues when the state needs to outsource, according to the DOE.

 “It can take several weeks to find and bring replacement motor gasoline from overseas that meets California’s unique specifications,” the department says.

By contrast, Texas uses a more conventional gasoline type which is less expensive, said De Haan.

“There are fewer refineries in California to produce the required gasoline,” he said. “The difference is that Texas has many refineries in their backyard … and there is more infrastructure to produce the fuel, so costs are generally lower.”

Tags California gas prices inflation Texas

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