On a recent webinar, UC Berkeley energy economist Severin Borenstein argued that more in-state oil production wouldn’t shield California drivers from global oil price shocks:
“The world has a very well-integrated crude oil market … when the price of crude oil goes up in one place because of a supply constraint, it goes up all around the world … So, we are part of that world oil market. There’s really nothing we can do to avoid that.”
He’s right – crude oil is a globally traded commodity, and California can’t unilaterally change its price. But oil prices are only part of what Californians pay at the pump – and there’s still plenty Sacramento can do to protect working Californians from higher prices.
“In a system that’s as tight as we’re in right now, small changes in supply are gonna have outsized impacts on prices and price volatility … California can’t control global markets, but it can control how resilient the California system is.”
The data backs that up.
In a July 2025 analysis, UC Davis economists noted that California’s gasoline price premium over the national average grew from roughly $0.25 per gallon in 2000 to $1.50 per gallon in 2025 – a gap that tracks the state’s policies and loss of refining capacity rather than movements in global crude prices.
S&P Global data supports the same point. Following refinery closures in 2025 and 2026, California’s gasoline price premium over global benchmarks has nearly doubled – from 27 cents per gallon to 47.7 cents per gallon – as the state turned to expensive foreign imports for supplies.
Economists have long blamed California’s high gas prices on a lack of capacity and flexibility in the fuel supply chain.
In a 2024 analysis, Lawrence J. McQuillan of the Independent Institute and Robert J. Michaels of Cal State Fullerton called California’s market for refined fuels “overly constrained, rigid, and isolated.” This “limits California’s ability to adjust to unforeseen events, and dependence on maritime shipping makes adjustments even slower and more expensive.”
To remedy, the authors recommend “lifting restrictions on oil exploration and drilling … reducing restrictions on refinery and pipeline capacity … [and] reviewing California’s stringent and unique environmental regulations that increase gasoline prices …”
It is true that California cannot insulate itself from global crude prices. But that’s only part of the story. Policymakers can still do more to strengthen the in-state fuel supply chain and protect consumers from higher prices at the pump.
