Despite a nationwide drop in gas prices, California drivers continue to face prices near $5 per gallon—thanks in large part to state-imposed taxes and regulations, not oil companies, according to state data and industry experts.
While Gov. Gavin Newsom blames “price gouging” by fuel producers, his own energy officials and economists say otherwise. The real burden, they argue, is California’s massive stack of fees, taxes, and climate mandates passed down to drivers.
“Despite Gavin Newsom’s tin foil hat conspiracy theories about ‘gas price gouging,’ the only one ripping off Californians at the pump is him,” said Assembly Minority Leader James Gallagher (R-East Nicolaus). Gallagher pointed to the state’s diversion of gas tax funds toward non-road projects, including bike lanes and the long-delayed $135 billion bullet train.
California’s gas prices are the highest in the continental U.S., surpassing even Hawaii, where fuel must be imported across the Pacific. According to AAA, the average price of regular gas in California is $4.95. That compares to $3.23 nationally, and just $3.41 in neighboring Arizona.
A breakdown by Stillwater Associates earlier this year showed California drivers pay $1.36 extra per gallon due to various taxes and regulatory costs. These include:
- 18 cents in federal gas tax
- 58 cents in state gas taxes
- 42 cents from the cap-and-trade program
- 11 cents from the state’s low-carbon fuel standard (LCFS)
- 2 cents for a state storage tank fee
The cap-and-trade program funnels 25% of its revenue to California’s high-speed rail project—despite the first segment still lacking $7 billion and unlikely to be completed before 2033.
Worse yet, the California Air Resources Board—whose members are largely appointed by Newsom—recently voted to increase the costs imposed by the LCFS, potentially raising gas prices by an additional $1.15 per gallon by the end of 2025. Though implementation is delayed, the hike is still on the books.
With rising electric vehicle use diminishing the gas tax base, Sacramento is now considering a new mileage tax to close the revenue gap. Proposals range from mandatory GPS trackers in vehicles to odometer inspections and tracking apps on drivers’ smartphones—raising serious privacy concerns.
Meanwhile, taxpayers continue footing the bill for climate policies that show little return in terms of infrastructure or emissions reductions.
