Gas prices in California are on the rise again with some estimates circulating online suggesting costs could rise by as much as 65 cents per gallon.
This week, a scheduled increase to the state’s gasoline excise tax went into effect, adding just under 2 cents per gallon to the price. A cleaner fuel policy — California’s Low Carbon Fuel Standard — is expected to gradually add to the cost seen at the pump, possibly adding another 5 to 8 cents per gallon this year.
That’s nowhere near the 65-cent figure some, including Republican lawmakers in Congress, are suggesting. So, where is that coming from?
What do experts say?
Severin Borenstein, an energy economist at UC Berkeley’s Haas School of Business, said this number is based on the most pessimistic scenario.
The Low Carbon Fuel Standard requires fuel producers, such as oil companies, to reduce the carbon intensity of their products over time. If they can’t, Borenstein said they have to buy credits from companies producing cleaner alternatives, like renewable diesel or electricity used to charge EVs.
“The people who are saying that will drive up the price 65 cents a gallon are taking the price ceiling that’s been imposed on those credits — that is the maximum it can be — and saying, ‘We’re going to go to that price ceiling,’” he said.
When cleaner fuel supply is abundant, credit prices drop and the impact on gas prices stay low, according to Borenstein. But if the market tightens, that could drive up the cost of gas and diesel.
Borenstein said credit prices are relatively low currently, accounting for roughly 8 to 10 cents per gallon at the pump, so taking that pessimistic view doesn’t make sense to him.
Renewable diesel and transportation using electricity has become a reliable source of credits for oil companies in the last five years, which has kept costs down for consumers. Borenstein said he doesn’t see that trend going away anytime soon.
“The whole point of the low-carbon fuel standard is to incentivize new technologies,” he said.
Drivers react
Lauren Bautista pulled into CJ Gas along Folsom Boulevard in Sacramento to fill up her sedan. The cost of regular is $4.09 per gallon here, but she uses premium so she paid $4.59.
“This is the cheapest place in town,” she said. “So that’s where I come.”
Bautista is originally from the East Coast and said California gas prices are often nearly double what she sees when visiting family. She isn’t surprised about more price increases because that’s just part of living in California.
A price board Tuesday, July 1, 2025, at CJ Gas at 6441 Folsom Blvd in Sacramento.Gerardo Zavala/CapRadio
“I think that’s a little bit of our own doing,” she said. “We got to pay for gas if you’re not driving an electric vehicle. Not everybody can afford them.”
Grass Valley resident Daniel Smith did one of his usual two or three monthly fill-ups at CJ Gas for his SUV. He noted that gas prices in California are high, something he’s reminded of when crossing state lines.
“You go to Nevada and as soon as you cross the border, I know diesel was over $5 here and it was just barely over $3 there,” he said. “We already pay enough in our taxes as far as fuel taxes and it just seems like every time everybody wants something, it goes into a fuel tax, and who knows where it actually goes.”
Some of the money from gas taxes is meant to support transportation infrastructure like road repairs and sidewalks, as outlined by the Road Repair and Accountability Act of 2017. But Smith said he hasn’t seen enough of these improvements to reflect how much he’s paying at the pump.
“I’ve seen some effect, but I don’t think that it’s utilized like it should be,” he said.
Gas prices in California
In California, AAA data shows the average price for a gallon of regular gas is hovering around $4.54. That’s the highest in the nation.
How much of that comes from the state’s gas taxes is somewhat unclear as Borenstein explains.
“Since 2015, California gasoline prices have had an additional component, what I call the mystery gasoline surcharge, above the impact of just our taxes and environmental fees,” he said.
He said this surcharge is “quite concerning” and that the California Energy Commission is currently studying it.
Even so, it has been difficult to prove price gouging is occurring. Gov. Gavin Newsom's attempt to do that last September failed because of a lack of “persuasive evidence,” according to CalMatters. He called on oil refineries to put more fuel into storage, but some experts argued that could increase costs instead.
The governor’s “crusade against the oil industry” isn’t surprising given how politically charged gas prices are in California, something Bornestein explained is likely because of how common long-distance commutes are.
“More and more low- [and] middle-income people are living far outside the cities and have very long commutes, which burns a lot of gasoline,” he said. “So they are really getting hit disproportionately by these higher gasoline prices.”
He recommends people use apps like GasBuddy, which provides real-time fuel prices at gas stations, and to avoid overpaying based on unproven science.
“Gasoline is gasoline,” he said. “The major brands say that they have additives that make your car last longer, but there isn’t much evidence that that is actually true.”
He said going to cheap gas stations — something he already does — is the best defense against price gouging because it saves money while pressuring major brands to lower their prices.
“California not only has higher prices than the rest of the country, it also has a much bigger dispersion of prices across stations,” he added.” “It’s quite common to see stations within a mile of each other that differ by 30 or 50 cents a gallon. You don’t see that much in other states.”
