California Gas Prices: Over $1.60 Per Gallon Attributed to State Taxes and Environmental Policies

Californians consistently face the highest gasoline prices nationwide, a situation highlighted by political commentator Bill Mitchell's recent tweet asking, > "Why are Newsom's gas prices so insanely high?" While public sentiment often attributes the costs to political figures, analyses from economic and energy experts point to a complex interplay of state-specific taxes, stringent environmental regulations, and an isolated market as primary drivers.

A significant factor is California's tax burden, which includes the nation's highest gasoline excise tax. As of March 2025, state and local taxes and fees alone contribute approximately $0.90 per gallon, according to the U.S. Energy Information Administration (EIA). This substantial tax component directly elevates pump prices compared to other states.

Environmental mandates also play a crucial role. California requires a unique, cleaner-burning fuel blend (CARBOB) to reduce air pollution, which is more expensive to produce, adding an estimated $0.47 to $1.15 per gallon in compliance costs. Programs like Cap-and-Trade and the Low Carbon Fuel Standard also impose additional expenses on fuel suppliers, typically passed on to consumers.

The state's isolated fuel market exacerbates price volatility. Over 90% of California's gasoline is refined in-state, with limited pipeline connections to other U.S. refining centers. A declining number of in-state refineries means unplanned outages can lead to significant supply disruptions and price spikes, as standard gasoline cannot be easily imported.

Despite public concerns about price gouging, multiple investigations, including a study by USC Professor Michael Mische, have found no clear evidence of widespread market manipulation. These reports consistently conclude that high gas prices are primarily structural and policy-driven. Governor Gavin Newsom signed legislation in 2023 to increase transparency, though its impact remains debated.

California's long-term goal to ban new gas-powered vehicle sales by 2035 may further influence the market by disincentivizing investment in traditional fuel infrastructure. Upcoming changes, such as a scheduled increase in the state excise tax on July 1, are expected to add continued pressure on prices, reflecting the ongoing complexities of California's fuel market.