California’s Gasoline Price Premium: A Decade of Divergence

California drivers have always paid more at the pump than the rest of the country, but the gap has been widening steadily. In 2016, the average West Coast premium over the U.S. national gasoline price was 40 cents per gallon, or 18%. By 2026, that premium had grown to $1.11 per gallon, 30% above the national average.

The drivers are structural, not transient. California’s Clean Air Act waivers, granted since the 1970s, led to the state’s own CARB gasoline formulation in the 1990s, a costlier blend that reduces smog but raises production costs. Layered on top is the Low Carbon Fuel Standard, enacted in 2009 and tightened since, which adds further compliance costs to every gallon sold in the state.

Supply-side pressure has compounded the regulatory premium. California has shuttered or converted roughly 500 thousand barrels per day of refining capacity over the past five years, out of an earlier base of 2.8 million bpd, forcing greater reliance on imports and inter-regional shipments. That trend is accelerating: Phillips 66’s Los Angeles refinery (138,700 bpd) completed its shutdown at the end of 2025, and Valero’s Benicia refinery (145,000 bpd) is scheduled to close by mid-2026. Together these closures remove nearly 284,000 bpd of additional in-state capacity, a further threat to the roughly 20% of traditional processing capacity California has already lost since 2020.

With regulatory costs still climbing and refining capacity continuing to contract, the structural case for a California premium that keeps widening, not narrowing, looks durable.

For more information on this chart, please contact Max Pyziur (maxp@eprinc.org).