West Coast Gas Prices Worst in Nation

W A S H I N G T O N, April 25, 2001 -- Drivers on the West Coast pay more at the pump year after year than in anywhere else in the country. There are a multitude of reasons for the region's sky-high gas prices, but no simple solutions.

When the average motorist was paying $1.43 for a gallon of regular unleaded a month ago, for example, Californians were shelling out $1.72 per gallon, according to the General Accounting Office, the investigative arm of Congress. Retail prices in nearby Oregon in Washington were also well above the national mean.

"Consumers are getting killed at the pump," Sen. Barbara Boxer, D-Calif., said today at a hearing on the price problem on Capitol Hill. "We have the highest gas prices in the country … [and] it's getting worse."

The West Coast Differential

Why the discrepancy?

The sheer quantity of gasoline consumed by the Golden State is one part of the answer.

"California is the third-largest gasoline consumer in the world — behind only the rest of the United States and Japan," Jim Wells, director of the GAO's Natural Resources and Environment division, told a Senate subcommittee.

Refineries in California operate at near full capacity in an effort to meet the high demand for gas in the state, but California also supplies fuel to Western states such as Oregon — which doesn't have a single refinery of its own — Arizona and Nevada. And high demand makes for high prices.

Without a single oil pipeline cutting across the Rocky Mountains, the West Coast is virtually cut off from the rest of the nation's supply of gas supply, making the region extremely susceptible to sudden gas shortages and the steep price increases they can cause.

"The West Coast gasoline market is isolated from out-of-state sources of gasoline so that supply shortages cannot be easily replaced," said Wells, noting that shipping gas in from out of state on tanker trucks is a slow and very costly undertaking.

California, which often drives price trends for the entire region, experienced unexpected disruptions in its supply of gasoline for five consecutive years, beginning in 1995, according to the GAO.

"When anything happens — when there is a pipeline rupture … when there is an explosion of a refinery in California … these prices skyrocket," testified Federal Trade Commission Chairman Robert Pitofsky.

On Monday, a major refinery outside Los Angeles caught on fire, sparking fears that gasoline prices would be pushed even higher.

'Cleaner' Gas and Higher Taxes

Another major part of the price problem may be of California's own making: The state uses its own special kind of gasoline.

Since 1996, California law has required that only an ultra-clean blend of reformulated gasoline — dubbed "CARB gas" for the California Air Resource Board, which set the stringent standards — be used.

Oregon, which produces none of its own gasoline and is therefore completely reliant on out-of-state sources, also has a few key factors unique to the state that drive up prices. The Beaver State has the eighth-highest state gasoline tax in the country and a prohibition on self-service gas stations. Oregon also has a high proportion of rural areas, which makes for higher transportation costs.

"To the constituents I represent … the sting of high gasoline prices is particularly blistering," said Sen. Gordon Smith, R-Ore., who called today's hearing. "For those with limited means or those who drive long distances … even a small increase in gas prices can be disastrous."

Pitofsky, who pledged today to complete FTC's inquiry into the high gas prices on the West Coast within 30 days, said the solution is to build more refineries.

"Until this country addresses the question of refinery capacity, I think we are in danger of seeing this kind of behavior of almost every summer," he said.

Over the last two decades, nearly half of California's refineries have closed. And no new refineries have been built in California or anywhere else in the United States since the 1970s.

The oil industry blames the lack of new refineries on stringent government regulations and strong opposition from local communities.

"We want our customers to have adequate supplies of gas," said Genevieve Murphy, a senior manager with the American Petroleum Institute.