CALIFORNIA

Tough Questions and Straight Answers
About California Gasoline Prices

WSPA realizes that consumers have asked a lot of tough questions lately about gasoline prices. We welcome those questions and offer the following information to help foster a healthy public dialogue on these issues.

What’s going on with gasoline prices?
According to the United States Energy Information Agency (EIA), gasoline prices are increasing nationwide, primarily due to rising crude oil prices. According to EIA, the cost of crude represents the largest single component in the price of a gallon of gasoline

Why are California gasoline prices generally higher than in other states?
For one thing, gasoline taxes are higher here than in almost any other state. Further, according to EIA testimony before Congress, demand for gasoline here has grown at roughly 2 to 4 times production capacity growth. Finally, California’s unique, more stringent cleaner-burning gasoline requirements (which result in California gasoline being the cleanest gasoline in the world) make it more expensive to produce.
Why do we sometimes see wide price variations within California?
Government agencies such as the California Energy Commission and other petroleum experts report that, due to differing supply/demand and other local market factors, gasoline prices are likely to vary from region to region throughout the state under all types of market conditions.

How do gasoline prices compare to the costs of other products?
According to the US Bureau of Labor Statistics, which reports the Consumer Price Index (CPI), gasoline prices have risen far less than many other products we use every day, including electricity, food, housing and medical care.

Are refiners making disproportionate profits on these high gas prices?
No. Business Week reported, for the first nine months of 2003, profit margins for oil and natural gas companies were about the same as U.S. industry as a whole. (6.2% for oil versus 6.4% for the average of all U.S. industries)

Over a five-year period for the petroleum companies reporting, profit margins were about 4.7%, which is slightly below the 5.2% average for all U.S. companies during the same period, again according to Business Week.

What’s being done to protect consumers?
Recently, the FTC stepped up its market oversight activities by initiating daily gasoline price monitoring to guard against pricing irregularities. And the EIA has a toll-free hotline for consumers to report suspected gasoline price gouging, at (800) 244-3301.

Western States Petroleum Association
1415 L Street #600, Sacramento, CA 95814

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