According to this preliminary Energy Information Administration report on California gasoline prices. I really want to paste in an excerpt here, but they’ve set Acrobat so I can’t copy text (grrr), so here’s the punch line: after you take out last year’s crude oil price spike, these factors conspired to raise gasoline prices:
-refineries producing close to physical capacity
-isolation and distance from other sources, such as Gulf Coast refineries
-California-specific gasoline, mandated to address air quality issues, which fragments and balkanizes wholesale gasoline markets
-the switch from MTBE to ethanol as the oxygenate
In other words, policy decisions and not price gouging are the fundamental root of higher and more volatile gasoline prices in California.