UC Berkeley economist explains 'mystery gas surcharge,' why CA pays more than any other state

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Friday, July 22, 2022
UC Berkeley economist explains CA's 'mystery gas surcharge'
U.C. Berkeley economist explains California's 'mystery gas surcharge' and why CA drivers pay more than any other state.

SAN FRANCISCO (KGO) -- No matter how much the price of gasoline rises or falls, a renowned U.C. Berkeley economist warns that you're paying a "mystery gas surcharge" - and that's on top of our higher state taxes and environmental fees. The I-Team's Dan Noyes has been investigating how and why Californians always pay more at the pump than any other state.

Yes, we pay more gas tax than any other state, 26 cents a gallon more than the national average. And we pay more to refine our cleaner-burning fuel, about 10 cents a gallon -- those numbers for this week, from U.C. Berkeley's Energy Institute at Haas. And the lead economist Severin Borenstein says, hidden in the $2.19 per gallon for refining, marketing and retailing is a "mystery gas surcharge" - currently 70 cents a gallon that can't be explained.

INTERACTIVE: San Francisco gas tracker

Dan Noyes: "Are you saying that they're charging more because they can?"

Severin Borenstein: "Absolutely. I'm sure they're charging more because they can. The question is, are there actual costs behind it that are justifying it?"

Borenstein says oil companies and retailers started the "mystery gas surcharge" after the explosion and fire at the Exxon Mobil refinery in Torrance seven years ago.

"Our prices went way up, which they always do after a refinery fire, but they never came down again to where they should be, given the higher taxes and fees," said Borenstein.

He provided a graph, showing how oil companies have charged California drivers an extra $40 billion compared to the rest of the country, since the Torrance explosion, and he testified last month at a State Assembly hearing into possible price gouging: "And there are people really hurting due to those higher gas prices."

VIDEO: Why does California pay more for gas? Deep dive on prices here

Why are gas prices soaring, why do Californians pay more, and what will it take to bring prices down? The ABC7 I-Team has a deep dive here.

Assembly Member Laurie Davies, a Republican from Laguna Niguel, said, "I mean, honestly, I find it kind of unbelievable that we've gone this many years, and we still haven't been able to figure the mystery out."

The Attorney General's Office testified that investigating the "mystery gas surcharge" would be difficult for them.

Kathleen Foote, Senior Assistant Attorney General told the committee, "That kind of investigation would take several years before you would actually get an answer if you got an answer."

No answers for us in the short term; the select committee is planning a series of meetings over the next three or four months. So, the I-Team's Dan Noyes asked a representative for the oil companies and refiners that do business in the West about the "mystery gas surcharge."

VIDEO: The most expensive gas in US is at this Mendocino station at nearly $10 a gallon, GasBuddy says

It just keeps getting worse...a gas station in Mendocino is now charging nearly $10 a gallon. According to GasBuddy, it's the most expensive gas in the country.

"Marketers can charge whatever they want for gasoline. It's based on consumers. Consumers will pick the gas station they want to go to. They want the best fuel for their automobile and as a single mom, I can tell you I want to pick a place that's well lit, that's clean, that I feel safe and I will pay more than any other surrounding gas station to make sure that me and my son are pulling up to a corner place that feels safe," said Kara Greene with Western States Petroleum Association.

"We need to be willing to shop around because not only do you get a better price, you put more pressure on those expensive stations which are usually the big brands to lower their prices," said Borenstein.

The professor tells us, that despite some companies' claims that their special additives improve your car's performance, virtually all gas is the same. So, shop at independent stations that charge less, and THAT should drive down the price of all gasoline more quickly.

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