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.
