Why Gas Prices Are So High

$2.19: That’s how much a gallon of gasoline cost the average California driver last week. Yes, it’s down from an all-time high of $2.40 in October. But some experts think we’re still paying as much as 20 cents a gallon too much.

Who’s to blame for high prices? There’s enough blame to go around.

It’s partly the collusion of a car culture and the state’s pollutant-trapping geography.

Californians use a “boutique” gasoline formulated to satisfy federal air pollution standards. That means we can’t import just any gasoline when market shortages hit. And state and local gasoline taxes, which fund the transportation infrastructure, are the nation’s fourth-highest.

But so-called Big Oil plays a big part. Since 1982, the number of California refineries has dropped from 44 to fewer than 20, and more than 90% of capacity is controlled by a small handful of refiners. By squeezing the supply, oil companies guarantee steady profits and goosed-up gas prices -- especially during the summer driving season, or whenever there’s a refinery fire or pipeline explosion.

Independent stations used to keep the market honest. But the oil companies have strategically used price fixing, rent gouging, the withholding of credit card reimbursements and other schemes to dramatically reduce the number of independent stations.

In tough times, the remaining independents are now the first to be cut off.

Still, blaming Big Oil for its monopolistic practices is like blaming a coyote for eating your pet: It’s not the coyote’s fault, but rather its nature. And politicians, regulators and judges have left the gate open.

Example: The merger of Texas-based Valero Energy and Ultramar Diamond Shamrock, which the Federal Trade Commission approved in 2001.

“We’re going to create more competition in California, and we’re going to reduce the cost of gasoline to the consumer,” gushed Valero Chairman Bill Greehey.

The marriage gave Valero about 20% of California’s refining market. Pre-merger, Ultramar was the state’s low-price leader.

As gas prices soared, Valero became the refinery industry’s profit king, and its prices are about average.

Oil and gas prices go up like a rocket and float down like a parachute. For the industry, it guarantees a soft landing.

For the rest of us, it means a bumpy ride.