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Nov 8, 2016 Blog

Why Are Diesel Prices Higher in California Than in the Rest of the US?

While crude oil prices are sharply declining throughout the US, diesel prices in California remain surprisingly higher than the national average. There are several reasons driving rising diesel prices in California. These reasons are explored below:

Higher Fuel Taxes:

High relative diesel costs in California are partially due to higher fuel taxes. In fact, Californians pay higher fuel taxes than residents in 46 of the other states do. While gasoline taxes in California are 68 cents per gallon, they are 33 cents in Nevada and only 19 cents in Arizona.

Unlike most other states, California charges percentage-based taxes in addition to per gallon taxes.

Additionally, fuel prices have substantially increased in recent years due to the Cap-and-Trade program, instituted by the California state government, which has led to an increase in the production costs of fuel. California fuel taxes are levied for maintenance, transportation, and construction projects.

Special Blend of Fuel in California:

Fuel burned in California needs to be blended specially so as to meet the state’s environmental standards. There are special winter blends and summer blends, which ultimately improve air quality. However, there are a limited number of refineries producing these blends. This limited supply increases the price of fuel by about 5-15 cents per gallon.

Difference in Prices of Dyed and Clear Fuel:

In California, the prices of fuel largely depend on the type of fuel. Dyed diesel tends to be significantly cheaper than clear diesel. As a consumer, this variation in diesel prices in California can at first be quite confusing. However, it is important to note that dyed diesel is preferred for off-road applications while the clear diesel is mostly for on-road usage by automobiles. Therefore, whereas many taxes are imposed on clear diesel, dyed diesel is exempt from most taxes.

Higher Operating Costs of Gas Stations:

California has a much higher average land value compared to neighboring states like Arizona. Thus, leasing land in California is expensive, meaning costs for a gas station are high. Additionally, compliance with smog control and groundwater pollution regulations gets expensive in California. Therefore, the costs associated with running and maintaining a gas station are quite high. Add to this a high minimum wage relative to other states and the result is costlier fuel in California.

In addition to these factors, there are a host of refinery issues that are also driving up diesel prices in California. You can mitigate the effect of these issues on the price you pay for fuel by shopping around for the best fuel rates and buying from a trusted supplier.

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While crude oil prices are sharply declining throughout the US, diesel prices in California remain surprisingly higher than the national average. There are several reasons driving rising diesel prices in California. These reasons are explored below:

Higher Fuel Taxes:

High relative diesel costs in California are partially due to higher fuel taxes. In fact, Californians pay higher fuel taxes than residents in 46 of the other states do. While gasoline taxes in California are 68 cents per gallon, they are 33 cents in Nevada and only 19 cents in Arizona.

Unlike most other states, California charges percentage-based taxes in addition to per gallon taxes.

Additionally, fuel prices have substantially increased in recent years due to the Cap-and-Trade program, instituted by the California state government, which has led to an increase in the production costs of fuel. California fuel taxes are levied for maintenance, transportation, and construction projects.

Special Blend of Fuel in California:

Fuel burned in California needs to be blended specially so as to meet the state’s environmental standards. There are special winter blends and summer blends, which ultimately improve air quality. However, there are a limited number of refineries producing these blends. This limited supply increases the price of fuel by about 5-15 cents per gallon.

Difference in Prices of Dyed and Clear Fuel:

In California, the prices of fuel largely depend on the type of fuel. Dyed diesel tends to be significantly cheaper than clear diesel. As a consumer, this variation in diesel prices in California can at first be quite confusing. However, it is important to note that dyed diesel is preferred for off-road applications while the clear diesel is mostly for on-road usage by automobiles. Therefore, whereas many taxes are imposed on clear diesel, dyed diesel is exempt from most taxes.

Higher Operating Costs of Gas Stations:

California has a much higher average land value compared to neighboring states like Arizona. Thus, leasing land in California is expensive, meaning costs for a gas station are high. Additionally, compliance with smog control and groundwater pollution regulations gets expensive in California. Therefore, the costs associated with running and maintaining a gas station are quite high. Add to this a high minimum wage relative to other states and the result is costlier fuel in California.

In addition to these factors, there are a host of refinery issues that are also driving up diesel prices in California. You can mitigate the effect of these issues on the price you pay for fuel by shopping around for the best fuel rates and buying from a trusted supplier.

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