James Hamilton at Econbrowser explains the recent 50 cents a gallon spike in California gasoline prices.
- California prices are usually 30-40 cents a gallon higher than the rest of the country
- About 20 cents is due to higher gasoline taxes
- Much of the rest is due to the use of higher quality gasoline to reduce air pollution
The latest spike had several causes.
- The fire at the Richmond refinery in August
- The closure of Kettleman-Los Medanos pipeline due to contamination
- A power outage that shut down ExxonMobil’s Torrance refinery in Los Angeles.
Price volatility is also significantly greater in California because it requires a different blend to meet air quality standards and the California oil market is relatively isolated (see map below).