California’s petroleum watchdog has identified structural issues in the state’s fuel market that contribute to higher prices at branded stations, yet the state has not activated the most aggressive regulatory tools designed to curb those costs. The findings emerged as gasoline prices climbed above $6 a gallon this spring, driven in part by global supply shocks from the conflict between Iran and Israel.
Tai Milder, head of the state’s petroleum division, testified before senators in June that the current crisis exposed a separate, ongoing problem with branded gasoline pricing. Data from his division showed that the highest-priced stations were all major brands, despite all fuel in California meeting identical standards. Chevron was noted as charging the highest premium over nearby competitors. Milder attributed this gap to the way fuel is purchased, noting that California relies heavily on contracts where refiners set prices for branded retailers, effectively locking those operators into specific costs.
Jeremy Martin of the Union of Concerned Scientists explained that branded stations cannot shop around for better rates because they are tied to their supplying refiner. In response, Chevron spokesperson Ross Allen stated that most of the company’s stations are independently owned and set prices based on local competition. He argued that California’s energy policies, rather than corporate pricing strategies, are responsible for high costs. The Western States Petroleum Association, the state’s industry lobby, added that California has fewer stations per capita than the rest of the country and that branded goods typically command a premium over generic alternatives.
Governor Gavin Newsom has personally criticized Chevron, accusing the company of using its brand name to overcharge drivers during wartime oil profits. Newsom previously pushed for new powers during special legislative sessions in 2022 and 2024. These laws created the petroleum watchdog, which found an unexplained premium of about 41 cents per gallon between 2015 and 2024, costing drivers an estimated $59 billion.
However, the laws also authorized more severe measures that have not taken effect. These include a potential penalty on excessive refinery margins, a requirement for refiners to maintain larger gasoline reserves, and rules requiring replacement fuel before maintenance shutdowns. A key reason for the inaction is that two refineries have shut down in the past year. The administration has instead focused on working with refineries to ensure supply.
The oil and gas sector remains a powerful force in Sacramento. Filings with the California Secretary of State show the industry spent $10.3 million lobbying the state in the first three months of the year. The Western States Petroleum Association and Chevron accounted for the majority of that spending, contributing $4.3 million and $3.7 million respectively.