We are used to high fuel prices in our home state of California. We routinely have the country’s highest gasoline and diesel prices, and we’re used to high fuel taxes. There are many reasons for our high prices, from local and state fuel taxes to environmental policies and supply chain issues. However, one reason that many people do not realize that drives high fuel prices is a lack of gas stations in the state and bans to stop the construction of new ones.
While California has the country’s second-largest number of gas stations, we fall far behind other states when considering the number of stations per capita or per mile driven. A working paper from the Energy Institute uses data from gas stations in Mexico to show that higher prices occur in places with fewer gas stations. In contrast, in areas where there are more stations, competition drives prices down. The data was tracked from 2017-2022, covering over 11,645 gas stations, and clearly shows that higher gas prices occur when there aren’t enough fuel stations.
However, higher fuel prices aren’t the only way a fueling station shortage affects California. It also has other significant economic consequences. In a May 2023 report from the California Fuels and Convenience Alliance titled Impacts of a Statewide Ban on New Construction and Upgrades to Fueling Establishments in California, they break down how our state is affected.
Who owns the fueling stations in California?
First, let’s make sure we have the correct definition of the different types of fueling stations to help us interpret the findings. There are three main types of fueling stations:
- Branded fuel stations: These stations are partnered with a major oil company and sell their proprietary fuel blends, like Chevron stations.
- Unbranded fuel stations: These stations are not partnered with a major oil company or proprietary fuel blends.
- Hypermarts: Large-scale retail merchants like Costco or Sam’s Club that sell fuel.
Now that we understand the different types of fueling stations, it’s essential to get an idea of their ownership. Data shows that the vast majority of fueling stations in California are independently owned and operate as small businesses, branded franchise stations, or unbranded fuel stations, with 42% operating as branded stations and 38% operating as independent stations. Only 17% of the state’s fueling stations are classified as hypermarts. Additionally, since most fueling stations operate as small businesses, they have a diverse workforce and ownership, with 43% of the stations in California classified as minority-owned. Owning and operating a fuel station is an excellent pathway to business ownership and offers flexible hours for employees needing part-time work or extra income.
What type of economic activity does the fueling station industry generate?
In California, the fueling and convenience industry generates significant economic activity. Here are a few statistics that showcase the direct economic power of this industry.
- It is estimated that the industry generates $75 billion in total sales. Fuel sales are estimated at $53 billion.
- The industry generates 66,300 jobs and $2.8 billion in wage income.
These statistics only consider the sale of goods and services and the job opportunities created by the industry. Indirectly, the industry supports the state in various other economical ways, from supporting fuel supplier businesses to other local companies and even utility revenue. In fact, data shows that the industry spent $464 million on utilities in 2022.
However, one of the ways the industry contributes most to California’s economic growth is through taxes. The fuel and convenience industry generates $9.7 billion in local and state taxes each year directly from fuel taxes. The industry also generates an additional $800 million in other taxes such as property, sale, income, utility, and other local or state taxes. That’s a significant amount of money generated for the state of California. As you can see from the plethora of data in this report, there is a significant economic advantage generated by the fueling industry.
Why are gas station bans happening?
Right now, most bans on new gas stations or expansions to existing ones are limited to small, local areas. In mid-2023, eight cities had these bans in place in Marin, Sonoma, and Napa counties. Other areas, like Los Angeles and Sacramento, are also considering plans. According to the 2040 Sacramento General Plan, the city proposes banning new gasoline stations or expansions to existing stations unless they provide electric vehicle charging, with at least one new charging station per one new gas fuel nozzle. There is also a proposal before the state government to commission a study by June 20, 2026, to phase out existing gas stations by a specific date. The proposal suggests that the study should consider incentives and regulatory barriers to help gas stations convert to electric vehicle charging stations.
What would be the effects of a statewide ban?
In a letter in response to the city of Sacramento’s proposed ban in their 2040 general plan, the California Fuels and Convenience Alliance stated, “Gas station bans threaten local economies with increased job loss, decreased tax revenue and will only lead to more pain at the pump for consumers. Empowering businesses, promoting competition and considering the diverse economic landscapes within a community are vital elements in shaping a resilient future for the fuel and convenience industry.” These comments echo the conclusions of the Impacts of a Statewide Ban on New Construction and Upgrades to Fueling Establishments in California report, which found that a statewide ban would have four main adverse effects, including:
- Fewer jobs and entrepreneurial opportunities
- Reduced fueling options for drivers, especially in growing areas
- Less investment in renewable fueling infrastructure
- Reduced competition and higher fuel prices
As a California fuel and lubricant supplier, we believe that the fueling station industry is vital to California’s economic success. We work with many local stations as a fuel and lubricant supplier, and they are invaluable to the regional and state economies. As the report we highlighted in the blog shows, significant negative impacts can come from these bans. We hope that alternative options can be explored that consider the economic benefits of the fueling industry now and in the future. For information on retail fuel branding, click here!