In a year when the buzzword in politics was “affordability” and inflation was voters’ top concern, gasoline prices were a bright spot. The national average price for a gallon of regular gasoline in 2025 declined by 21 cents from the year before, to $3.10, and 2025 was the third straight year of falling prices, according to the Energy Information Administration.
But the West Coast stands apart. Four of the EIA’s five regions had similar average gas prices in 2025. The West Coast region was over $1 higher. It pulls up the national average so far that the other four regions are all below it, even the East Coast, which uses the most gasoline.
Since the EIA data is weighted by volume of gasoline sold, it’s easy to know where most of the responsibility lies for the West Coast’s outlier status: California, home to about 60 percent of the region’s population. If you remove California, with its $4.41 average price, from the calculation, the West Coast’s average price in 2025 would have been 34 cents per gallon lower.
This isn’t a red-state/blue-state issue. Other Democratic-governed states don’t have gas prices as high as California’s, and they aren’t that different from Republican-governed states. The EIA doesn’t track weekly gas prices for every state, but of the ones that it does, California stands out (along with Washington). The lowest average gas price that Californians saw in any week of 2025 was 88 cents higher than the highest average price New Yorkers saw.
The most obvious place to start in explaining California’s problem is its gas tax. At 70.92 cents per gallon, it was the highest of any state in 2025, and more than double the median state. But Illinois was only 4.5 cents behind, and its prices were nowhere near California’s.
California and Washington are the only two states with economy-wide cap-and-trade programs. California’s program raises the price of gasoline by forcing gasoline suppliers to buy allowances. Those higher costs are eventually passed on to drivers. The California Legislative Analyst’s Office estimates that cap-and-trade raises the retail price of gasoline by 23 cents per gallon.
Climate and energy analyst Lauren Teixeira, in a 2025 paper for the Breakthrough Institute, charted how California’s environmental policy decisions have snowballed over time. About 25 years ago, California’s gas prices were only slightly higher than the national average. Today, they are much higher and more volatile.
Because gasoline is a relatively undifferentiated commodity that is traded nationwide, its pretax market price should be just about the same everywhere. That economic theory holds true in most of the country. But since 2003, California has mandated that its gasoline be blended differently from the gasoline sold anywhere else, in a bid to improve air quality.
California also does not have any inbound pipelines for crude oil or gasoline that connect to the rest of the country. Its imports primarily arrive by ship. The Jones Act, a protectionist federal law that covers shipping within the United States, makes it uneconomic to transport oil or gasoline from the Gulf Coast region to California.
Because of the fuel mandate and the transportation constraints, California’s gasoline market has been separated from the rest of the world. “California had a robust in-state extracting and refining industry for a long time,” Teixeira told me. But in recent years, that has changed.
Oil extraction has been declining for decades. ExxonMobil fully withdrew from drilling in the state two years ago, the same year that Chevron, formerly named Standard Oil of California, moved its headquarters to Texas. Regulations on refineries have contributed to their closure and greater industry concentration: Over 90 percent of California’s refining is now done by just three companies.
California has egged on the decline of conventional refining by heavily subsidizing plant-based diesel fuels. Refineries have transitioned to producing only the subsidized fuels, which in turn means that they cannot produce regular gasoline. On top of that, the plant-based subsidized fuels contribute to deforestation around the world as forests are converted into farmland to feed California’s trucks.
California also has less competition between gas stations than other states. There are almost twice as many drivers per gas station in California as in the country as a whole, and regulatory barriers have prevented more gas stations from opening, Teixeira wrote.
A new law in California is allowing more oil drilling, starting this year. Phillips 66 and Kinder Morgan have announced that there will eventually be one inbound refined products pipeline to California.
But those aren’t going to help much in the near future. It takes years to develop new oil wells, and the pipeline isn’t scheduled to be completed until 2029.
In the meantime, Californians will continue to pay far more for gasoline than just about anyone else in America. And for what? The state’s share of commuters who use public transportation is slightly below the national average. As wealthier Californians switch to electric vehicles and pay nothing for gas, poorer people who can’t afford a new car are shouldering a growing burden. And even if California eliminated all of its greenhouse-gas emissions from passenger vehicles, it would account for only 0.2 percent of the world’s total GHG emissions.
Next time Sacramento politicians want to complain about price-gouging at the pump, they need to look in the mirror. Other states aren’t having this problem.
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