Why California usually pays more at the pump for gasoline

Retail prices for regular grade gasoline in California are consistently higher than in any other state in the continental United States, often exceeding the national average by more than a dollar per gallon. Several factors contribute to this high price, including state taxes and fees, environmental requirements, special fuel requirements, and isolated petroleum markets.

Taxes and fees
The components of retail gasoline prices are taxes and fees, distribution and marketing, refining costs, and crude oil prices. Drivers in California pay the highest taxes at the pump, equivalent to $0.90 per gallon (gal) between local, state, and federal taxes as of March 2025.

Federal taxes—which are the same for each state—account for $0.18 of the $0.90/gal in taxes. The other $0.72/gal is made up of state excise tax ($0.60/gal), state sales tax ($0.10/gal), and an underground storage tank fee ($0.02/gal). California’s state gasoline excise tax is the highest in the United States; the average across all states is $0.28/gal.

Environmental requirements

In addition to state taxes, the California Energy Commission estimates that environmental compliance costs added as much as $0.54/gal as of March 2025. The state’s Cap-and-Trade Program and Low Carbon Fuel Standard reflect costs associated with fuel supplier emissions and carbon intensity, and these costs are ultimately reflected in the price consumers pay at the pump.

Special fuel requirements

California also mandates a special blend of gasoline designed to reduce pollution and improve air quality. This fuel burns cleaner but is more expensive to produce because it requires more processing steps and expensive blending components.

Refiners outside the state only make this blend to supply California’s market, meaning that California primarily relies on in-state refineries for its gasoline supply.

Isolated petroleum markets

Supply side issues also contribute to higher California gasoline prices relative to the rest of the country.

Most of the gasoline consumed in California is refined within the state due to lack of petroleum infrastructure connections. California is geographically isolated from other U.S. refining centers because no pipelines supply California from across the Rocky Mountains and only a limited number of pipelines deliver to the West Coast from the Gulf Coast. Of the refineries outside of California with physical access to the state’s gasoline markets, only a few can meet California’s stringent fuel blending requirements.

California also imports gasoline from other countries, such as India and South Korea, to meet its fuel supply needs. Other countries produce California-specification gasoline, but high shipping costs usually limit imports to periods of refinery outages or the summer driving season.

In addition, West Coast refineries have historically maintained lower inventory levels compared with the U.S. average, and California refineries have been closing, with more closures on the horizon. All of these supply chain issues mean that California gasoline prices are more volatile and subject to large spikes, especially if any of the limited number of refineries go offline for maintenance or have an unexpected outage.