California Energy Price Data for December 2024

In October, California average natural gas rates (12-month moving average) continued to rise relative to the averages for the rest of the US. Electricity rates across all three primary end users as well as the cost of fuels remained the highest in the contiguous states.

Much of the recent legislation increasing regulation and consequently production costs on the state’s diminishing refinery base has been largely based on contentions related to refinery gross margins (refinery operating income less crude oil costs) as tracked by the Energy Commission tax and fee data (reported here monthly as indicated below). The new reporting as mandated by SB X1-2 (2023) provides additional details on the refinery margins, with monthly data on net margins (gross margin less operating costs) now available. The Energy Commission has defined operating costs to be those costs “incurred by the operator of a refinery in the state to produce gasoline meeting California specifications, including, but not limited to, costs of labor, electricity, natural gas, chemicals, maintenance, hydrogen, and other intermediate oil products, federal renewable identification numbers, obligation costs, capital investments, logistics costs, and additive costs.”

Net operating margin consequently captures the portion of gasoline and diesel prices flowing as income (as an industry) from refinery operations. It is not the same as profit. Profit instead is calculated as the summation of net operating income from all company operations less additional company-wide cost components including selling, general and administrative expenses, exploration expenses, depreciation, depletion and amortization, interest and debt costs, and taxes.

Combining the 11 months for which the net margin data is available, the state’s refineries in this period generated net operating income of only $0.013 per gallon of gasoline sold, or an effective rate of 0.4% on the wholesale price and, using the GasBuddy.com data, 0.3% on the average retail price.

The low level of the net margin also has implications to future gasoline costs from the recently renewed regulatory additions. In response to the backlash generated from the likely price impact of the recently approved LCFS (low carbon fuel standard) amendments, Air Resources Board staff have attempted to backtrack from their previous assumptions that 100% of LCFS and Cap and Trade costs are likely to be passed onto the customer. Yet, the low net margins shown in the Energy Commission data indicate that any new costs imposed on refinery operations are more than likely to be passed through. The current roster of these new price impacts includes the following additional mandates on the refinery operations:

• Compliance costs of SB X1-2, although relatively minor in the context of this list.
• Unknown costs of the yet-to-be-determined compliance requirements for new storage mandates under AB X2-1 (2024)
• Higher LCFS costs under the Air Board’s recently adopted amendments.
• Higher Cap and Trade costs under pending changes being considered by the Air Board, including increased required for refinery operations and for use of the fuel allocated at the wholesale point of sale.

At the other end of the cost scale, however, is the continued rise in the amount of taxes and fees imposed on Californians as they buy fuels. In the latest Energy Commission data, total federal, state, and local taxes and fees total $1.38 or a third (33.4%) of the cost of each gallon of gasoline. This amount will see a jump this month as the revised LCFS requirements take effect.

Average prices ($ per thousand cubic feet; 12-month moving average) for the 12 months ended October 2024 and changes from the previous 12-month period for each end user: