DPMO analysis flags 41¢ average "mystery gasoline surcharge" since 2015, finds branded stations carry biggest share

SACRAMENTO — The Division of Petroleum Market Oversight on Oct. 26 presented new economic analysis to the Assembly Committee on Utilities and Energy that replicates academic work and finds an unexplained retail price gap — which the agency calls a “mystery gasoline surcharge” (MGS) — averaging roughly 41¢ per gallon in California since 2015.

“My calculation…is that Californians have been paying 41¢ per gallon extra for every gallon of gasoline sold since 2015,” DPMO Director Ty Melder told the committee, citing in‑house work validated with outside economists. He said spikes in the MGS reached $1.32 during the late‑2022 price events.

DPMO’s findings summarized

- Mystery surcharge: DPMO’s economists estimated an average unexplained premium of about 41¢/gal since 2015 after controlling for taxes, fees and state environmental programs.

- Branded vs. unbranded: The analysis shows the unexplained premium is concentrated at major branded retail channels. DPMO reported an average MGS of about 72¢/gal for major branded stations versus about 34¢/gal for unbranded retailers.

- Market structure and vertical integration: The state’s refining market is highly concentrated, the agency said. The top four firms account for about 90% of refining capacity in California (a figure DPMO said would rise if additional announced exits occur). Dealer‑tank‑wagon sales — direct deliveries from refiners to stations that allow refiners to set delivered prices — account for roughly 39% of California refinery sales compared with about 7% for the rest of the U.S., giving vertically integrated firms greater ability to influence street prices, DPMO said.

- Haves and have‑nots among refiners: Melder described a bifurcated market. During large price spikes, most refiners make strong margins, but outside price spikes the “brand‑focused” refiners tend to show persistently higher margins while “unbranded‑focused” refiners’ margins have fallen toward earlier levels and appear financially stressed.

What DPMO will do next

Melder said the agency will keep investigating potential causes of the MGS, look for ways to increase competition between branded and unbranded sellers, and support the CEC on options to preserve unbranded supply. He also said DPMO has the authority to investigate market manipulation and that its team has reviewed past enforcement actions and continues to scrutinize spot market trades.

Context and limitations

DPMO and CEC noted the data are improving because of new reporting requirements adopted after the special session, but also said discrepancies remain in reported operating expense streams and in reporting conventions between filings to the CEC and investor disclosures. DPMO said further data work and improved reporting standards would help clarify whether observed differences reflect accounting and reporting differences, structural industry changes, or other causes.

Ending

DPMO urged continued transparency and said it will publish a fuller, data‑driven report soon. The agency’s work adds a new, measurable frame to debates over whether supply shortages, market structure, vertical integration or other factors best explain California’s persistently higher prices at the pump.