California’s unique cap and trade program functions as an added hidden tax on fuel. The cap and trade tax is charged directly to fuel producers in the form of a “carbon credit” and/or low carbon fuel standard mandate, requiring biofuels be added to gas in the production process. The Sacramento Bee has reported this policy currently contributes 10-12 cents a gallon to the price of gas, but is expected to rise to as much as 36 cents a gallon by 2030 as California Air Resources Board officials increase requirements.

A challenging political and regulatory environment has caused many California refineries to shut down, making consumers more vulnerable to supply disruptions or unexpected increases in demand. According to California Energy Commission data discussed in an RBN Energy blog post, in 1982, when California’s population was almost half of its present 40 million, California had 40 refineries with a total 2.6 MMb/d of capacity. Today, there are 12 operating refineries with a combined capacity of 1.86 MMb/d. This capacity problem is compounded by the fact that the unique fuel blend required by California regulators effectively makes the state a “fuel island,” unable to accept refined fuel imports.

While there are many benefits to producing fuel locally – job creation, tax revenue, energy security, and fewer emissions related to transporting fuel from far away – California policymakers have made oil and gas production challenging with excessive taxes and red tape. As a result, California oil production has dropped 36 percent since 2000 while many other oil producing states, such as Texas and North Dakota, have seen their production expand greatly.