California leads the nation in additional methods than one — taxes, laws, and, as soon as once more, gasoline costs. As of mid-Could 2025, the typical gasoline worth in California is $4.85 per gallon, far above the nationwide common of $3.26, in keeping with GasBuddy and AAA.
And it’s getting worse. A March 2025 examine by USC Professor Michael Mische forecasts California’s gasoline costs may spike 75 % to over $8 per gallon inside the subsequent 12 months. That’s not hyperbole — that’s the trajectory until policymakers reverse course.
The offender? It’s not oil firms or world demand. It’s a long time of state-level tax hikes, regulatory overreach, and misguided local weather mandates which have warped the gasoline market in California. This can be a man-made downside — a case examine in authorities failure, not market failure.
What Actually Drives Gasoline Costs
In line with the US Vitality Data Administration (EIA), gasoline costs are typically formed by 5 parts: crude oil costs, refining prices, distribution and advertising, taxes, and laws. In California, taxes and regulatory prices alone account for greater than $1.30 per gallon — almost double the nationwide common.
California has the very best gasoline tax within the nation, at $0.678 per gallon, not together with extra charges and environmental surcharges. Add within the Cap-and-Commerce program, the Low Carbon Gasoline Commonplace (LCFS), and boutique gasoline blends which can be required solely in California, and it turns into clear why Californians pay extra.
And issues are deteriorating additional. The Mische examine warns that with refinery closures on account of hostile allowing processes and low anticipated returns underneath California’s local weather mandates, gasoline provide within the state may drop by 20 % by 2026, whilst demand stays comparatively secure. Fewer refineries and inflexible gasoline requirements will imply tighter provide and better costs.
Texas vs. California: A Story of Two Gasoline Markets
To see how unhealthy California’s insurance policies are, look no additional than Texas. As of Could 2025, Texas drivers pay about $3.00 per gallon, almost two {dollars} lower than Californians. Texas levies a mixed state gasoline tax of simply $0.20 per gallon, and its regulatory construction is streamlined and energy-friendly.
Texas refineries aren’t topic to California’s carbon credit score system or compelled to supply pricey special-blend fuels. And since it permits for a extra aggressive and open gasoline market, the state advantages from each decrease wholesale costs and extra environment friendly distribution. The distinction is stark — and instructive.
The Fallacy of “Inexperienced” Gasoline Mandates
Supporters of California’s method declare excessive costs are a needed price for combating local weather change. However what if these insurance policies aren’t truly working?
California’s greenhouse gasoline emissions have declined, however a lot of the discount has come from cleaner electrical energy era, not gasoline insurance policies. In the meantime, low-income and working-class Californians are being punished on the pump whereas driving older, much less fuel-efficient autos.
This quantities to a regressive tax that hurts the very folks politicians declare to guard. Worse, these guidelines don’t cut back world emissions — they simply push vitality manufacturing and refining out of the state and abroad, usually to nations with weaker environmental requirements.
The Financial Price of Fragmented Gasoline Insurance policies
In my educational work, together with a peer-reviewed paper and subsequent analysis (SSRN profile), I’ve documented how state-level fragmentation of gasoline markets — by way of taxes, environmental packages, and infrastructure restrictions — creates pricey inefficiencies that drive up costs.
These insurance policies discourage new funding in refining and gasoline transportation. They create synthetic shortages. And so they enhance transaction prices that finally fall on shoppers.
Briefly, California’s mannequin is a textbook case of how overregulation and authorities micromanagement destroy affordability with out delivering proportional advantages.
What Ought to Be Achieved As a substitute?
The reply isn’t new subsidies or “inexperienced” credit. It’s not banning gas-powered automobiles or rationing automobile miles. The answer is to embrace free-market capitalism and the ideas Milton Friedman championed: let costs mirror market circumstances, not bureaucratic preferences.
Which means:
- Repealing California’s Cap-and-Commerce and LCFS packages.
- Standardizing gasoline blends to match these used nationwide.
- Halting the gasoline tax will increase scheduled underneath present regulation.
- Encouraging personal funding in refining and gasoline infrastructure.
The federal authorities may assist by streamlining interstate pipeline allowing and revisiting federal environmental guidelines that duplicate or exacerbate state mandates. However the actual change should come from Sacramento.
Conclusion: A Disaster of Coverage, Not Worth
California’s excessive gasoline costs aren’t the product of world volatility or grasping firms. They’re the results of a protracted collection of deliberate coverage selections that make gasoline tougher to supply, tougher to move, and tougher to afford.
When authorities picks winners and losers in vitality markets, shoppers lose. And when politicians mistake management for competence, they create techniques that serve ideology somewhat than actuality.
It’s time to desert the parable that prime gasoline costs are the worth of progress. California has created a man-made gasoline disaster — and solely free-market reforms can remedy it.