Rob Nikolewski, MERCURY NEWS
A recent committee hearing in Sacramento about gasoline prices offered more specifics about something many San Diego drivers know all too well that prices vary widely from one gas station to the next.
It’s not unusual to see striking differences, even when the stations are practically, or literally, right around the corner from each other.
For example, the posted price for a gallon of regular at a Petromerica station on 16th Street in downtown San Diego on Tuesday was $5.53. Yet barely one block away, the price for a gallon of regular at an ARCO station came to $6.69. That’s a difference of $1.16 per gallon.
On the same day, a Chevron station off Interstate 5 in Del Mar charged $5.90 for customers paying with cash or a Chevron card. But about a quarter-mile east on the same street, a Shell station’s price for a gallon of regular was 40 cents higher $6.30, and there were four cars lined up at the fueling pumps.
The disparity in prices across the state was one of many issues addressed June 3 at a California Senate oversight hearing of the Committee on Energy, Utilities and Communications that lasted just over four hours.
The chief deputy director of the California Department of Tax and Fee Administration, Gentian Droboniku, gave a presentation on the price differentials among branded, unbranded gas and “hypermart” gas stations in the state.
Branded stations refer to those that partner with a major oil company, such as Shell, Chevron or ARCO, to sell their specific fuel. Unbranded stations can be small, independently owned mom-and-pop stations such as Petromerica, and Stars and Stripes, as well as those connected to large chain retailers like 7-Eleven.
“The gasoline these unbranded stations sell is produced by the same refineries as branded stations and drawn from the same tanks as branded fuel, but it doesn’t contain a branded proprietary cleaning additive,” Droboniku said. “It does contain an additive that meets the requirements set by the California Air Resources Board.”
Hypermart gas stations are typically tied with large supermarket chains or warehouse retailers, such as Costco.
Many drivers across the Golden State who shop around for the lowest gas prices in their driving area have long been aware that prices at branded stations are typically higher than fuel at unbranded stations, or warehouse locations where customers often must be members to fill up.
But Droboniku’s presentation offered some granular details compiled from a joint report the CDTFA conducted with the California Energy Commission that broke down average prices, retail margins and margin percentages.
The retail margin is the difference between the price a business pays to acquire a product and the price it sells that item to customers.
In 2025, the report said branded stations, on average, sold their gasoline at higher prices per gallon across the board, compared to unbranded and hypermart stations.
The retail margins last year came to 87 cents per gallon at Chevron, 83 cents for Shell, 71 cents at 76 stations (formerly known as Union 76) and 44 cents at ARCO, according to the study.
Compare that to unbranded stations in 2025 that had average retail margins of 45 cents, which represented 10.3% of their retail price. Hypermarts had retail margins of 27 cents on average, accounting for 6.4% of the retail price.
Looking at Chevron in particular, its retail margin per gallon back in 2013 came to just 35 cents.
“Retail margins are increasing, especially for branded gasoline,” Droboniku said.
He went on to say that data collected between January and September 2025 at California’s 100 most expensive gas stations and the 100 least expensive stations showed a price differential of $1.76 per gallon.
A wider comparison of the top 500 gas stations and the bottom 500 told basically the same story, with a difference of $1.28 between their averages.
What’s going on?
The reasons why branded gasoline costs more in California have long been debated.
Some fuel analysts surmise there are more gas stations per capita in other states, thus reducing price competition, and that land values in the Golden State may make it more profitable to convert old gas stations into other businesses.
During the hearing, Zachary Leary, chief lobbyist for the Western States Petroleum Association trade group, alluded to the fact that at least eight jurisdictions in Northern California have banned the building of new gas stations, actions driven primarily by climate action goals and promoting the adoption of electric vehicles.
In March 2021, the city council in Petaluma unanimously voted to prohibit the creation, expansion, reconstruction and relocation of gas stations.
When asked during the hearing if the price difference is similar in certain respects to name-brand prescription drugs compared to lower-cost generics, Leary said, “I would liken it to Cheetos versus Cheese Puffs” sold at grocery or convenience stores.
“There’s different components that go into each of them brand loyalty, commercial, you name it,” Leary said. “There’s a ton of things that go into why branded is a different cost than unbranded.”
Jamie Court, a longtime critic of California oil companies and president of Consumer Watchdog, was blunt, telling the committee he believes in-state refiners have taken advantage of customers.
“Other states don’t do this,” he said, referring to branded stations’ high retail margins. “That’s the real key. It has to do with consolidation in the market.”
Court made reference to what UC Berkeley professor Severin Borenstein has called the “mystery gasoline surcharge.”
While California gas prices have high for a long time, they took a jump after an explosion at the Exxon Mobil refinery in Torrance in February 2015. Once repairs were made and the refinery came back online, however, an overhang remained an extra, residual price that has never gone away, even after state taxes and fees are accounted for.
“Before that explosion, there wasn’t a problem,” Court said. Refiners “got used to making higher profits … and that was their way to do it.”
Casting an eye on algorithms
Droboniku of CDTFA said his organization wants to look at whether algorithms and other technologies are being used to affect prices at the pump.
“These algorithms tell the sellers what to change to maximize profit,” he said. “It appears that many in the market at all levels (are) using some software and many are using exactly the same software. It’s really opaque in an area (that) could use some more sunlight.”
According to Droboniku, a recent study of 14,000 gas stations in Germany found that when stations adopted algorithmic pricing, their margin increased by as much as 15%, possibly indicating tacit collusion.
The director of the recently created Division of Petroleum Market Oversight told the committee that Assembly Bill 325 passed by the Legislature and signed into law by Gov. Gavin Newsom, which went into effect this year prohibits businesses from using shared software algorithms to coordinate prices.
“We have have notified market participants” about the new law, Tai Milder said. “If companies do that and it has the effect of fixing prices, that is certainly something that’s actionable.”
An uncertain gasoline landscape
California has often been described as a “fuel island” that is disconnected from refining hubs in the U.S., lacking inbound pipelines from other states and requiring a unique blend of specially formulated gasoline that reduces air pollution.
Expensive gasoline has irritated California drivers for decade and the state’s policies regarding the petroleum industry and its efforts to transition to electric vehicles have been an increasingly hot political issue.
Six years ago, Newsom issued an executive order banning the sale of new gasoline-powered cars, SUVs and light trucks by 2035. When gas prices spiked to more than $6 a gallon in late summer and early fall of 2022 and 2023, Newsom accused oil companies of “lying and gouging Californians to line their own pockets.”
Industry officials have long complained about what they regard as a hostile business environment in the state, and two major refineries have closed in recent months.
The Phillips 66 twin refinery in the Los Angeles area shut down late last year and the Valero facility in the Northern California town of Benicia ceased operations at its 145,000 barrels-per-day operations two months ago.
The Valero and Phillips 66 facilities combined to account for about 18% of California’s total refining capacity to process gasoline, diesel, aviation and other transportation fuels. Imports from foreign countries can help pick up the slack, but the closures may leave the state more vulnerable to price spikes.
The closures led a more conciliatory tone last year between state officials and oil companies, resulting in the Legislature passing, at Newsom’s urging, Senate Bill 237. The law included provisions easing permitting requirements in and around Kern County, the heart of California’s oil patch, in an effort to boost in-state oil production.
But relations still appear volatile.
Chevron recently posted signs at some of its gas stations that read, “California politicians are choosing foreign oil and fuels over local jobs and lower costs.” The signs include a QR code directing consumers to the company website, calling on consumers to “speak up for affordable, reliable energy.”
Newsom’s press office clapped back on social media over the Memorial Day weekend, telling drivers to avoid buying gas at Chevron stations.
“Pro tip: unbranded gas comes from the same refineries, storage tanks, and pipelines, and it meets the same state standards to keep your engine running clean, even if it doesn’t have a fancy name like ‘Techron,’ ” the post on X said. “Big Oil is already making billions off Trump’s Iran War; don’t let them rip you off even more by overpaying for the brand name.
California’s gasoline prices are the highest in the nation and the ongoing conflict in Iran has only accelerated things.
According to AAA, the average price for a gallon of regular in the San Diego area got as high as $6.21 on May 6.
Although prices have slackened a bit since then, the average on price on Thursday stood at $5.83 per gallon. That’s $1.70 higher than the national average of $4.13.
