But the 41-year-old Australian Power - who had just broken Mario Andretti's record for pole positions - emerged with the 2022 series victory thanks to a smooth drive for third.
The Penske drive had just one win a season in which there were nine different race winners.
The famously consistent Dixon has been a title contender in 11 of his 21 IndyCar seasons.
He is bidding to equal A.J.Foyt's record of seven titles, but his fellow Kiwi McLaughlin now presents one of the hurdles to him doing so.
In just his second season, McLaughlin has been an undoubted success story, to the point that he may be among the title favourites next year.
McLaughlin, also from the dominant Team Penske which includes Power and Newgarden, was under initial orders to cover Chip Ganassi's Dixon.
McLaughlin ended up tied for fourth with Palou, but claimed fourth for himself on the tiebreaker, having won three races this year.
McLaughlin was sixth and Dixon 12th at Monterey.