The Democratic governor of Arizona and the Republican governor of Nevada have signed a bipartisan letter warning against California Gov. Gavin Newsom’s gasoline refinery project, which they believe might lead to fuel supply shortages and higher costs.
“It is evident that increased regulatory burdens on refiners and forced supply shortages will result in higher costs for consumers in all of our states,” said Arizona Gov. Katie Hobbs and Nevada Gov. Joe Lombardo in their letter to Newsom. “With both of our states reliant on California pipelines for significant amounts of our fuel, these looming cost increases and supply shortages are of tremendous concern to Arizona and Nevada.”
Newsom’s proposal would require refineries to construct massive storage tanks to hold more than the two weeks of output currently required; Chevron, which operates the majority of the state’s dwindling refinery capacity, claims that building each storage tank in California would cost $35 million and take ten years, with the costs of building, filling, and maintaining these tanks passed on to consumers.
Hobbs and Lombardo also highlighted the California Energy Commission’s judgment that the proposal “may artificially create shortages in downstream markets,” which they claim would “raise costs for consumers in Arizona and Nevada.”
Newsom has publicly blasted gas refiners for “greed” and “price gouging,” yet his own CEC appointee said expanding gasoline supply is critical to preventing price surges for customers if one of the state’s few refineries closes. California’s refineries have shrunk to just ten, and with a moratorium on the sale of new gasoline-powered passenger vehicles beginning in 2035, energy corporations are hesitant to invest billions of dollars in refineries that will soon have no new customers.
Federal, state, and municipal taxes and levies add around $1.62 to the cost of each gallon sold in California, which has the highest gas taxes and rates in the country. According to AAA, California’s average petrol price is currently $4.75 per gallon, while the national average is $3.25 per gallon, leaving a $1.50 per gallon discrepancy between California and the rest of the country. After deducting 18 cents per gallon in federal taxes, California state and local gas taxes and levies add $1.44 to the cost of each gallon of gasoline, accounting for 96% of the price difference between California and American gas. California employs its own unique fuel blend, limiting output to a few refineries in California and Washington state while also increasing manufacturing prices.
Last year, the United States Environmental Protection Agency compelled Phoenix gas stations to begin selling reformulated, lower-emission petrol, reversing Arizona’s governor’s 1998 opt-out.
“Our proposal will save hundreds of millions of dollars per year for customers, including those in Arizona and Nevada, by helping to minimize price spikes. “It’s time to act,” Newsom told X after the governors’ opposition letter was public.
Hearings on the measure will be held in a special session on September 18, 19, and 26, with a vote on October 1.
