CA Gas Prices Soar: Watchdog Investigates Potential Price Gouging Amidst Iran Conflict

California’s petroleum market watchdog is issuing warnings about potential price gouging as some gas stations across the state charge upwards of $7, and even $8, a gallon. The surge comes amid ongoing conflict in Iran, which has sent global oil prices soaring and exposed vulnerabilities in California’s unique fuel market.

While the statewide average currently sits at $5.66 per gallon, reports are surfacing of dramatically inflated prices at individual stations. GasBuddy, a fuel price tracking service, identified a Chevron in Essex currently selling gas for $9.69 a gallon, a station in Los Angeles’ Chinatown at $8.71, and one in Vidal Junction at $7.79 as of Friday. These prices are drawing scrutiny from state officials.

Market Oversight and Potential Violations

Tai Milder, director of the California Energy Commission Division of Petroleum Market Oversight, stated the agency is “vigilantly monitoring” retail, wholesale, and spot markets. “Any reports of unfair practices or market manipulation will be taken seriously, and we will not hesitate to refer any illegal conduct for further investigation and prosecution,” Milder said in a statement. This division was established in 2023 specifically to address price volatility, following two consecutive years of summer gas price spikes exceeding $6 per gallon.

The current crisis is fueled by a 30% jump in national gas prices since the U.S. And Israel launched attacks on Iran three weeks ago. Iran’s response has included blocking approximately 20% of the global oil supply, creating significant disruption. California, already facing prices roughly $1 higher than the national average, is feeling the squeeze particularly acutely. According to Rystad Energy’s chief economist Claudio Galimberti, roughly 9 million barrels of oil a day are currently off the market due to attacks on facilities or producers taking precautionary measures, creating an “extreme deficit.”

California’s Unique Fuel Landscape

California’s consistently higher fuel prices are a result of several factors. State taxes and fees, environmental programs, and a requirement for a cleaner fuel blend all contribute to the cost. However, the state’s relatively isolated petroleum market – with 80% of gasoline coming from in-state refineries – makes it particularly vulnerable to disruptions. The U.S. Energy Information Administration details the specific components of California’s fuel costs, highlighting the impact of these factors.

This isolation means refinery outages and potential market manipulation have a more pronounced effect. A 2024 report from the California Energy Commission found that, even after accounting for environmental rules and taxes, Californians pay an extra 41 cents per gallon, with the largest share of that difference attributable to industry profit. The report also indicated that previous price spikes were linked to refineries going offline without adequate backup supply and “potentially manipulative trading” during those periods of scarcity. You can find the full report here.

Profit Caps and Regulatory Response

Lawmakers and regulators have been relatively quiet about price gouging recently, and the energy commission has paused a decision to impose a profit cap on refiners. This decision was prompted by a series of refinery closures, raising concerns about potential future fuel supply shortages. The pause reflects a delicate balancing act between consumer protection and ensuring adequate fuel availability.

Consumer Advocacy and Industry Response

Jamie Court, president of the nonprofit ratepayer advocacy group Consumer Watchdog, argues the widening gap between national and California prices is evidence of price gouging. “We know they made 49 cents per gallon in January,” Court said, referring to the refineries. “We know now that their margins are closer to $1.25 per gallon,” he added, citing his group’s analysis of state and Oil Price Information Service data.

Chevron responded with a statement indicating that most of its gas stations are independently owned and operated, allowing those business owners to set their own retail prices. Spokesperson Ross Allen explained that these prices are generally determined by economic forces like supply, demand, and competition. He also noted that while crude oil prices have increased, California’s taxes and environmental fees add over $1.20 per gallon. A breakdown of gasoline price components can be found on the California Energy Commission website.

Valero, Marathon Petroleum, and Shell did not immediately respond to requests for comment.

Agency Outreach and Consumer Advice

The petroleum oversight agency has contacted stations displaying “excessive and disproportionate” pricing, including multiple locations in Los Angeles, San Bernardino, and Northern California. The agency is also advising Californians to shop around and compare prices between branded and unbranded gasoline, noting that all gasoline sold in the state must meet stringent emissions control and engine performance standards.

Looking Ahead: Supply Concerns and Market Stability

The immediate future of California’s gas prices remains uncertain. The duration of the conflict in Iran and its impact on global oil supply will be key factors. The state’s reliance on in-state refineries also means any further disruptions to refinery operations could exacerbate the situation. The energy commission will continue to monitor the market and investigate potential instances of price gouging, but the long-term solution may require a more comprehensive approach to address the underlying vulnerabilities in California’s fuel supply chain. The agency is also planning a workshop to discuss the summer gasoline outlook, as detailed here.