Key Takeaways
California consumers are about to be hit with gas price increases of as much as $1.15 per gallon because the state’s governor, Gavin Newsom, its legislature, and a political body known as “CARB” are combining forces to “electrify all parts of (their) transportation system.”
A USC study predicts this will total between $600 and $1000 per Californian annually.
New requirements include mandating the use of more low-carbon fuels ($100+ Billion!) and requiring refiners to store away larger fuel supplies, which is capital- and maintenance-intensive, among other things.
California’s native oil production has dropped 35% on Newsom’s watch because of an unconscious leasing program and regulatory assaults on the industry.
Californians already pay more for gasoline than all states except Hawaii, an island in the Pacific.
These added costs are meant to drive the cost of gasoline so high electric transportation becomes the only option.
California currently has the second-highest gasoline prices in the United States, trailing only Hawaii, and is poised to increase them even further through a series of new policies and regulations. Next year, gas prices could rise by as much as $1.15 per gallon due to the state’s new carbon credit system, higher taxes, stricter refinery regulations, and the planned closure of a Phillips 66 refinery in Los Angeles. According to a USC Marshall School of Business analysis, the average Californian would need to earn between $600 and $1,000 more annually (before taxes) just to offset these price hikes — unless they switch to an electric vehicle, which comes with its challenges.
Following the November elections, the California Air Resources Board (CARB), a regulatory body almost entirely appointed by the governor, updated the state’s Low Carbon Fuel Standard (LCFS). This new mandate requires producers of hydrocarbon-based fuels to buy more credits from non-hydrocarbon fuel producers. The revised LCFS is expected to generate an estimated $105 billion in EV charging credits and $8 billion in hydrogen credits, primarily funded through fees on gasoline and diesel — costs that will ultimately be passed on to everyday consumers.
The LCFS changes will also impact California-grown food and goods, as higher diesel costs — driven by the new regulations — will raise transportation costs for trucks and trains moving goods within the state and across the country. Governors of Arizona and Nevada have warned that their residents could face fuel shortages and price hikes as they rely on California for fuel. According to CARB, the new carbon standards are expected to add an additional 47 cents per gallon to gasoline prices and 59 cents per gallon to diesel prices by 2025.
This shift to a stricter LCFS follows new legislation requiring refiners to keep larger fuel inventories than the current two-week minimum. This is aimed at reducing supply shortages and price volatility, as well as curbing what the state sees as “higher profits for the industry.” To comply, refiners will need to invest heavily in storage infrastructure, as gasoline has a limited shelf life. The result has been the closure of a Phillips 66 refinery in Los Angeles, which accounted for 8% of the state’s refining capacity. This shutdown will further strain fuel supplies, pushing prices higher and leaving California with just 16 refineries to produce 2 million barrels of its unique fuel blend — a product that is not made anywhere else.
Professor Michael A. Mische estimates that the new carbon credit system will raise the price of regular gasoline by 40 to 65 cents per gallon by 2025. He also expects that the governor’s new refinery regulations will increase prices by another 5 to 27 cents per gallon, while the Phillips 66 refinery shutdown will add another 8 to 14 cents. Additionally, since California’s gas taxes are tied to the state’s price index, Mische forecasts a rise of 1 to 2 cents per gallon in 2025. Taken together, these changes could lead to a price hike of 55 to 90 cents per gallon for regular gas and 95 cents to $1.15 for premium gas by 2025.
California Governor Newsom recently purchased a $9.1 million mansion in Kentfield, a wealthy town that’s 90 miles away from Sacramento, the state capitol. According to Senate Minority Leader Brian W. Jones, “While regular Californians face tough choices between putting food on the table or gas in their cars, Newsom will be chauffeured to work from his luxury home in a taxpayer-funded car, running on taxpayer-funded gas, on the rare occasions he decides to show up.”
Since Newsom took office in 2019, California’s oil production has dropped by approximately 35%, while oil production has increased in other states. Newsom has also signed legislation allowing local governments to block new oil wells and has effectively halted new drilling permits. These actions are part of California’s broader goal to phase out petroleum-based internal combustion engines and gas-powered vehicles by 2035. The state’s strategy appears to be to drive up oil and gas prices to the point where consumers have no choice but to switch to electric vehicles. As Cliff Rechtschaffen, a member of the California Air Resources Board, stated, “the goal of all of our transportation rules is to electrify all parts of our transportation system.”
However, this push for electrification faces significant challenges. Despite its progressive energy policies, California imports more electricity from other states than any other state in the nation. The state’s power grid is already overstretched, suffering from brownouts and blackouts, and the electricity demand is expected to grow as more people switch to electric vehicles.
Conclusion
The California Governor, Legislature, and State Air Resources Board are working in tandem to restrict the availability of oil and gas and increase the cost of gasoline at the pump so severely that middle-class and working-class drivers must choose between groceries and fuel for their vehicles. The state’s policies and regulations are reducing oil and gasoline production, which will cost Californians more to fill up their vehicles. If California does not produce its own oil and gasoline, it will need to import fuels produced elsewhere—countries with far less environmental standards than the United States. While the United States has been closing refineries, China has been building them and most likely would be happy to supply California with its boutique fuel at a cost. If that were to happen, California would become dependent on a country with lax environmental standards that uses slave labor. China is already way ahead of the United States in producing low-cost electric vehicles and it dominates the supply chain for EV batteries.
