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A mysterious gas surcharge is costing Californians billions every year. Where is that money going?

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File: A customer pumps gasoline into his car at an Arco gas station on March 3, 2015 in Mill Valley.
Justin Sullivan/Getty Images
File: A customer pumps gasoline into his car at an Arco gas station on March 3, 2015 in Mill Valley.

Gas prices in the state spiked about three years ago and never fell back down like they should have. The mystery may be tied to this local refinery fire.

The average price of regular gas in the Golden State is now $3.52 per gallon— the highest it's been since 2015. And while Californians are used to paying more for gas than the rest of the country, something didn't quite add up for UC Berkeley professor Severin Borenstein.

That's because around three years ago prices spiked. And they never fell back down like they should have. Borenstein calls it "California's mystery gasoline surcharge," and he’s on a mission to figure out where it's coming from.

His suspicions started with the Torrance refinery fire in 2015. That’s when the spike first happened.

The charges that already exist

Before understanding the mystery surcharge, it’s important to first comprehend the other charges that make California fuel so expensive. Borenstein breaks it down like this:

  • The cleaner-burn gasoline we use adds about 5 to 10 cents more. 
  • The cap and trade program for greenhouse gases add about 12 cents a gallon.
  • The low carbon fuel standard fluctuates, but it adds generally around 7 cents a gallon.

The higher taxes and the low carbon fuel standard and environmental programs are going to government programs to help low-income people afford energy, to build the high-speed rail and other public transit systems.

However, when all those charges are accounted for, that still leaves an additional roughly 20 cent surcharge that’s unaccounted for.

So, what is this mystery surcharge?

That's the thing; we don’t know. But Borenstein does have a few theories as to where the money could be going.

  • It’s going to the sellers – Refiners have more market power and are not putting as much gasoline into the market as they could. 
  • Ports and logistics – There are many logistical constraints in the importing process. In the past when there have been refinery fires, the price spikes were only temporary. "Once the price went up, we started seeing imports come in from Washington state, Singapore, from the Gulf and we're not seeing that to the extent that we're used to," Borenstein said.

But those are just Borenstein's best guesses. There's still a lot that's unknown.

What can be done?

Borenstein has been on this crusade for some time. He’s let policymakers know but hasn’t seen any action. 

A number of legislators have said that they're concerned, but I haven't seen any follow through at this point. I haven't seen any sort of legislative hearings or any bills to actually create this sort of committee with the sort of resources one would need to actually dig into that.

And that’s exactly what Borenstein is calling for: an entity wholly dedicated to figuring out where this money is going.

He speculated it would probably cost millions of dollars, but the surcharge is costing Californians roughly $10-12 million every day. You can find more on Borenstein’s investigation here.

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