California Cannot Control World Oil Prices, But It Can Control the California Premium

California policymakers often point to the global oil market when explaining the state's persistently high gasoline prices. A new analysis from Extracting Fact makes an important distinction: California cannot control the worldwide price of crude oil, but Sacramento has considerable influence over the additional premium Californians pay at the pump.

UC Berkeley energy economist Severin Borenstein recently noted that crude oil is traded in a highly integrated global market, meaning a major supply disruption can raise crude prices around the world regardless of where the oil was produced. But crude oil represents only part of the retail price of gasoline.

California's vulnerability is compounded by an increasingly constrained and isolated fuel market. Rice University energy expert Skip York told an Assembly hearing earlier this year that when a supply system is as tight as California's, relatively small disruptions can produce disproportionately large effects on prices and volatility. While California cannot control global markets, he argued, the state can control the resilience of its own energy system.

The numbers cited by Extracting Fact are striking. A 2025 UC Davis analysis found that California's gasoline premium over the national average increased from approximately 25 cents per gallon in 2000 to $1.50 per gallon in 2025. Meanwhile, S&P Global reported that following refinery closures in 2025 and 2026, California's gasoline premium over global benchmarks nearly doubled, from 27 cents to 47.7 cents per gallon, as the state became increasingly dependent upon imported fuel supplies.

That distinction matters. California's unique fuel requirements, declining refining capacity, constrained infrastructure and growing dependence on supplies transported long distances into the state leave consumers increasingly exposed when something goes wrong. Economists Lawrence McQuillan and Robert Michaels have described California's refined-fuels market as "overly constrained, rigid, and isolated," limiting its ability to respond quickly when supplies are disrupted.

California cannot repeal the laws of global commodity markets. But state policymakers do control many of the policies affecting California's domestic production, refining capacity, pipelines and broader fuel infrastructure.

As California continues losing in-state oil production and refining capacity, the policy debate should therefore extend beyond the world price of crude. The more relevant question is whether California is making its own fuel system more resilient or deliberately making an already isolated market even tighter.

For California motorists paying the difference at the pump, that is hardly an academic distinction.