The difference isn't just in taxes. California has an artificially restricted supply of gasoline because it requires a specific formula (ostensibly to reduce emissions) and only six or seven refineries are equipped to meet that regulation.

Oregon's standards allow it to buy from a far larger market.

Ah, good to know! Makes a lot of sense. Do you know if it actually does reduce emissions?

It does. Just at a very basic level they're reducing the amount of smog-producing particulates and toxins such as benzene in the typical gallon of gas. Obviously, a reduction in those constituents is going to affect their ratios in the combustion products, it's like reducing the number of moles on the left side of a balanced chemical equation. The moles on the right are going to drop because there's less material.

California has an interesting history with environmental legislation, as it had a clean air board before the EPA existed: http://en.wikipedia.org/wiki/California_Air_Resources_Board

I don't know.

This is actually one area where the refining industry wants federal regulation: they would vastly prefer to deal with a single set of standards for the whole country than tailoring individual plants to 50 different standards.

There are minimum federal standards:

http://www.epa.gov/otaq/fuels/gasolinefuels/rfg/areas.htm

So the state specific requirements only really matter if they exceed the federal standards.

It's pretty likely that reformulated gasoline is effective in reducing smog (I think CO is the big target).

> So the state specific requirements only really matter if they exceed the federal standards.

Which is exactly the case in California, hence the higher prices.

To a large extent, I was replying to your wording. There is federal regulation. I was probably over-reading.