Gasoline is averaging $6.13 a gallon in San Diego right now, May 5, 2026. Let's break down that per-gallon price.
Drilling and extraction of crude oil: $1.35 per gallon.
Elevated shipping insurance rates due to Iran war: $0.30 per gallon.
Elevated cost of oil per barrel because of Iran war, due to supply & demand dynamics and fears about future supply: $0.80 per gallon.
California's Phillips and Valero refineries are now permanently shutdown due to a long list of regulatory and compliance burdens, maintenance costs, and a toxic legal and tax environment, making them unprofitable in the long term. This represents a loss of 17% of California's refining capacity in the last 6 months. There are 11 refineries remaining in the state but only 7 of those produce the gas that goes in your car. Those 7 refineries are now operating at 100% capacity, and without imports, we would have a 5-8% gasoline supply deficit. That means if California didn't import refined gasoline, we would run out of gas in 4-6 weeks. This adds a scarcity premium due to supply & demand dynamics, and it's highly sensitive to disruptions at the refineries: $0.94 per gallon.
Refinery's specialized union labor and engineers: $0.22 per gallon.
Refinery energy usage, with California among the highest industrial energy costs in the country: $0.14 per gallon.
Industrial catalysts, chemicals, and processing needed to refine oil to the California Air Resources Board (CARB) standard. The CARB standard is more stringent than the federal EPA standard and mandates the use of California Reformulated Gasoline, which burns cleaner, evaporates less, has less sulfur and benzene, no MTBE additive, and contains ethanol. The intention is to reduce smog and pollution. It also means California can't get gasoline from Arizona or Nevada because it doesn't meet the CARB standard and is illegal to sell here. CARB gas costs more to produce, and since only a handful of refineries mostly in California produce it, and they're running at 100% capacity, any disruptions at those refineries causes supply shocks and associated price hikes: $0.08 per gallon.
With no oil pipelines coming into California, and since we're unable to simply bring in gasoline from nearby states due to our CARB standard, we ship 75% of our crude oil from Alaska and overseas, and 20% of our CARB compliant gasoline as a finished product from refineries in India and South Korea. Those ships have to return empty. We don't get any oil or gasoline directly from the eastern US, for a multitude of reasons I don't have time to go into here. Ironically, the long shipping routes and less environmentally regulated refineries overseas actually cause more carbon emissions. So shipping cost: $0.18 per gallon.
Evaporative and other losses during the long ocean voyage: $0.01 per gallon.
Tanker insurance: $0.09 per gallon.
Port of San Diego offloading fees: $0.05 per gallon.
Fuel terminal storage and additive blending: $0.06 per gallon.
Trucking distribution to local gas stations: $0.08 per gallon.
California state fuel excise tax: $0.61 per gallon.
Federal fuel excise tax, unchanged since 1993: $0.18 per gallon.
California environmental monitoring of underground storage tanks at gas stations: $0.02 per gallon.
California carbon emissions cap and trade program, which requires fuel suppliers by law to buy enough carbon allowances from the California government to cover the carbon released when you burn your fuel. The intention here is to drive up fuel prices and make alternative fuels more competitive to reduce carbon emissions. Unfortunately, for various reasons, for example the heavier oil we're importing, our refineries now have a higher carbon footprint per gallon of gas produced. This requires them to buy more carbon allowances to remain legally compliant, and of course they pass on the cost of those carbon allowances to consumers: $0.25 per gallon.
California low carbon fuel standard (LCFS). This is a regulatory system to force oil companies to pay for the transition to renewable fuels. Think of it as a tax on the carbon density of a fuel. Oil companies are forced by law to buy LCFS credits from companies that produce alternative low carbon fuels such as electricity for electric vehicles, biodiesel, and hydrogen, to offset their LFCS deficit. The main difference from the cap and trade program is that the money goes directly to producers of clean fuels rather than the State: $0.22 per gallon.
San Diego sales tax: $0.11 per gallon.
Gas station payroll: $0.07 per gallon.
Gas station utilities and insurance: $0.06 per gallon.
Credit card fees at gas station: $0.18 per gallon.
Gas station profit. Yes the credit card companies are making more off a gallon of gas than the gas station: $0.13 per gallon.
Add all those numbers up and you get $6.13 a gallon.
Cost of Iran war: $1.10 per gallon. This is caused by Iran holding 20% of the world's oil supply hostage, because they insist they must build a swarm tactic of 10,000 drones and 10,000 missiles to overwhelm Israel's air defenses, so they can then send in their nukes. This number will come down as the Strait of Hormuz is reopened.
Cost of State of California gas tax, scarcity premium, CARB gas regulations, carbon emissions programs, and the logistics of shipping oil and CARB-grade gas across the world, not including San Diego sales tax, port fees, storage, and other fixed costs... Before you see this number, consider that California only produces about 0.8% of global carbon emissions, and much of our carbon emissions programs are offset by long shipping routes and less regulated refining overseas: $2.39 per gallon.
