On July 1, California’s gas taxes are set to go up by 2.2 cents per gallon because of a state law that automatically increases those taxes annually to help pay for the state’s road infrastructure. That means state taxes of 63.4 cents a gallon, per the Sacramento Bee. Diesel taxes will go up by 1.6 cents to 48.2 cents per gallon. These boosts aren’t particularly large, but they are a reminder of the root causes of our intractably high gas prices: state government policy.
With the war in Iran disrupting Middle Eastern supplies, gas prices have soared nationwide and caused significant upset among Americans elsewhere. Yet Californians seem remarkably tolerant of our self-imposed situation where we pay around $1.80 a gallon more than the national average. That average has fallen just below $4 as we approach July 4 travels and is as low as $3.48 in Texas. Our gasoline prices are higher than Hawaii’s — and it’s pricey to ship fuel to remote islands.
Our higher costs aren’t only tied to state gas taxes. California mandates a special fuels formulation that makes us a gasoline island, as we can’t simply ramp up supplies from neighboring states. Thanks to state lawsuits and other policies, the oil industry is reducing its refining capacity here, thus reducing supply and driving up prices. Our cap-and-trade program and other regulations also raise prices, with estimates suggesting climate programs add 42 cents a gallon.
We have the nation’s highest electric-vehicle take rate, and EV owners don’t pay gas taxes — only a modest extra registration fee. That provides more pressure to raise gas taxes on everyone else, although the state is considering a mileage-based road charge to deal with that disparity.
The California Air Resources Board’s amended Low Carbon Fuel Standard didn’t spark the enormous price boosts that some critics warned about, but has boosted prices a few cents a gallon. All of these rules and taxes have reasonable defenses. But as you pay more at the pump, remember that the high prices are a choice our politicians have made.