Why Did Gas Prices Go Up in California?

Gasoline prices in California are consistently higher than in other parts of the country. This consistent difference stems from unique state-level policies, specific characteristics of its fuel production, and logistical challenges in fuel distribution. These elements collectively impact the price consumers pay at the pump.

California’s Regulatory Framework

California’s stringent environmental regulations significantly influence gasoline costs. A primary factor is the mandate for California Reformulated Gasoline (CARB gasoline), a unique blend designed to reduce air pollution. This specialized fuel requires additional, more complex, and costly refining steps than conventional gasoline to lower pollutants, directly contributing to higher per-gallon expenses.

State taxes and fees also add to gasoline prices. As of July 1, 2025, California’s gasoline excise tax is 61.2 cents per gallon, among the highest in the U.S., and is subject to annual inflation adjustments. Gasoline is also subject to state sales tax, which varies by local district, typically around 2.25%.

Environmental programs further increase costs. The Cap-and-Trade program, a market-based system to reduce greenhouse gas emissions, adds an estimated 30 cents per gallon as of November 2023. The Low Carbon Fuel Standard (LCFS) aims to reduce fuel carbon intensity, adding between 11 and 47 cents per gallon, with projections for 2025 indicating a potential increase. These regulatory and tax burdens collectively add a substantial premium to California’s gasoline prices.

Refinery Operations and Capacity

California’s fuel production significantly impacts pricing. The state has a limited number of refineries producing specialized CARB-compliant gasoline. As of early 2024, California’s refining capacity was about 1.68 million barrels per day, a reduction from historical levels. Disruptions at these facilities can quickly cause supply shortages.

Refinery operations require periodic maintenance, known as turnarounds, which temporarily reduce output. Unplanned outages due to equipment malfunctions or incidents also constrain supply. Reduced availability of California-blend gasoline during these events causes immediate price spikes. The concentration of refining capacity, with four refiners controlling 90% of the state’s crude oil refining, magnifies the impact of such disruptions.

Importing large quantities of CARB-compliant fuel from outside California is often not feasible due to its specialized nature. Few global refineries produce this specific blend, making California vulnerable to in-state production issues. This limited sourcing flexibility means fewer alternatives exist when domestic production falters.

Supply Chain and Distribution

The logistical challenges and associated costs of transporting fuel to and within California further contribute to its higher gas prices. The state is relatively isolated from the extensive national pipeline networks that typically move refined products efficiently across other regions of the country. While some pipelines exist, such as the Calnev Pipeline which transports products from Los Angeles refineries to Nevada, they primarily serve areas outside California or specific in-state distribution points.

This limited pipeline connectivity means California relies heavily on its in-state refinery production to meet demand. When local production is insufficient, fuel must be imported, often via more expensive methods like marine tankers. Transporting fuel by sea, or even by rail, adds significant costs compared to pipeline delivery. Once refined products arrive in California, there are additional costs for storage and transportation from terminals to individual gas stations throughout the state.

The state’s vast geography and population distribution necessitate an intricate and costly distribution network. Moving fuel from coastal refineries or import terminals to various inland and remote locations involves extensive trucking, adding to the overall cost structure. These distribution expenses, combined with the state’s isolation from broader national fuel supply chains, create a higher baseline for the delivered price of gasoline.

Global and National Market Influences

While California’s unique regulations and infrastructure create specific cost drivers, global and national market forces also play a fundamental role in setting the baseline price of gasoline. Crude oil prices are the primary determinant of gasoline costs worldwide, typically accounting for about half the price consumers pay at the pump. Fluctuations in global supply and demand for crude oil directly impact prices everywhere, including California.

International events, such as decisions by the Organization of the Petroleum Exporting Countries (OPEC) and its allies (OPEC+), can significantly influence crude oil prices. For example, OPEC+ can coordinate production cuts to increase prices or raise supply when prices are deemed too high. Geopolitical events, including regional conflicts or trade sanctions, can disrupt oil supply or create uncertainty, leading to price volatility. The Russia-Ukraine war, for instance, caused crude oil prices to spike due to fears of supply disruptions.

Economic growth and global demand trends also affect oil prices; a slowdown in economic activity can reduce demand and lower prices, while robust growth can increase them. These global factors establish a foundational price for crude oil that all refiners, including those in California, must pay. When these international costs rise, they amplify the existing California-specific expenses, resulting in even higher prices at the pump for consumers.