As Californians continue to wonder why they suffer disproportionately at the pump compared to other states, a new study from a prominent researcher says the state’s perpetually high gas prices are largely “self-inflicted.”
Michael Mische with the USC Marshall School of Business recently published “A Study of California Gasoline Prices,” diving into the reason why California is typically the most expensive state in the U.S. to fill up your vehicle.
The conclusion: California’s high gas prices are the “result of directed policies and a litany of regulations, taxes, fees, and costs,” according to Mische.
“The data is overwhelmingly compelling,” he told KTLA on Monday. “There is no evidence of price gouging, either by gas station owners or refiners or oil producers in the state — at least widespread.”
Mische came to that conclusion after examining about 50 years of gas prices throughout the state and analyzing what led to spikes and lulls.
“It is uniformly acknowledged that California has the most stringent regulatory, some would argue, again, that depending on perspective, either a toxic or visionary environment, for oil and gas companies in the world,” the study reads in part. “Regulatory oversight, irrespective of one’s perspective, are layered into and accumulate throughout the supply change ultimately adding to the cost burdens of compliance for oil and gas industry operators, which, in turn, contribute to higher consumer prices at the pump.”
Mische and other experts refute Gov. Gavin Newsom’s claim that oil companies have been “gouging” California drivers for years — arguing that greed has played a larger role than policies and market forces. The governor has targeted the industry with investigations and legislation aimed at increasing transparency and keeping prices in check.
In a statement to KTLA, a spokesperson for Newsom said he has “avoided severe gasoline price spikes like the historic 2022 spike” since he signed a price-gouging bill two years ago.
“The law established the nation’s first state-level independent petroleum watchdog to hold Big Oil accountable, and the state has more transparency from the industry than ever before,” the statement reads in part.
Patrick DeHaan, head of petroleum analysis at GasBuddy, questions the approach of Newsom and California democrats. If price gouging is really the culprit, he asks, then why is gas in California so much more expensive than in other states?
“These are costs only associated with California,” DeHaan told KTLA on Monday. “California has done a terrific job chasing [refineries] out of the state and suddenly wondering why they don’t have enough gasoline or why prices skyrocket.”
Another reason for the state’s rising prices is the fall of the state’s oil production. California has by far the largest economy in the U.S. but is seventh in oil production, Mische points out.
At various points between 1903 and 1930, California was the country’s top producer in oil. Now, less than a dozen will be open by the end of 2025, with more likely to close in the years after. California’s unique blend of gasoline for vehicles, mandated by environmental policies, isn’t widely manufactured by refineries in places like Texas and Oklahoma, so a majority of California’s product comes from the Middle East, Mische notes.
“California is facing perhaps a severe supply shortage,” he said. “Supply has come down faster than demand. Simple economics will tell you … prices will go up.”
The most obvious hit to consumers’ wallets in the state, according to Mische, is the gas tax. Each year, on July 1, the tax increases, directly raising prices at the pump. As of Monday, it’s at 59.7 cents per gallon, easily the highest in the U.S. Each year’s increase is indexed to inflation.
A turning point in the state’s gas prices came in 2015, Mische said, with the institution of the Cap-and-Trade Program under former gov. Jerry Brown. A strategy to reduce greenhouse emissions, the program “creates a powerful economic incentive for significant investment,” according to the California Air Resources Board.
Mische says it simply passes the costs to consumers.
“The Cap-and-Trade is itself probably, in my opinion, the most volatile, and even to a large extent, the most sinister [reason for high costs],” he said. “Ever since 2015, the prices have accelerated and gotten wider and wider as a variance to the national average.”
As of Monday, California’s average gas price was $4.809 per gallon, nearly two dollars more than the national average of $3.168, according to AAA.
So what’s next? Gov. Newsom, as reiterated by a spokesperson in an email to KTLA on Monday, is committed to his pledge that California will only allow new car sales of zero-emission vehicles starting in 2035 — a pledge that is still on track according to the administration. Mische isn’t as convinced.
“I think it’s an admirable goal, but I don’t think it’s very realistic. You’d have to have significant infrastructure investment,” Mische said. “You have to have willful adaptation by the consumer … You’re going to force consumers to make massive changes to their garages and parking spots with at-home chargers, so I don’t think it’s as palatable as one might think it might be for the average citizen, particularly those in the lower income and the working class families in California.”
Mische’s study claims that with the looming deadline of 2035 hanging over their heads, what’s the point of keeping prices low at the pump for these oil refineries and gas stations?
As of right now, “plunging for the [fully electric vehicle]” is not something that Mische would recommend for those looking to dodge high prices. He says consumers should be “mindful” of the varying prices of their local gas stations, and perhaps opt for a hybrid vehicle when it’s time for a new ride.
“I think we have to be much smarter consumers, because ultimately the price of gasoline in the state is going to go up, and it’s going to be quite painful for a lot of folks,” Mische said.