California Gas Tax to Increase Again on July 1st
On July 1st, the excise tax rate on gasoline in California will increase by 1.9 cents to reach 59.6 cents per gallon (cpg). The diesel tax will also see an increase of 1.3 cents, reaching 45.4 cents.
California’s 3rd District Congressman, Kevin Kiley, urged state lawmakers to stop collecting gasoline taxes, stating that the proper action would be to completely suspend fuel tax collection.
Kiley expressed his disbelief at the repeated hikes in gasoline taxes, pointing out that California already imposes the highest gasoline taxes in the nation, with gasoline prices also being the highest. Despite being $1.70 above the national average, California’s gas prices surpass the second-highest state by 53 cents. Kiley emphasized that even if the nearly 60-cent gasoline tax were canceled, California would still be the state with the second-highest gas prices in the country, making it unnecessary to further raise gas taxes.
Data from the American Automobile Association (AAA) reveals that the average price of regular gasoline in California was $5.305 on Friday, slightly lower than previous days, while the national average gasoline price stood at $3.636. In some areas of California, such as Alpine County where prices reached $6.80, Mono County at $6.29, and Humboldt County at $5.85, gasoline prices were even higher.
The trend of increasing gasoline consumption taxes in California has been on the rise, with a cumulative increase of 27.3% ($12.9 cents) from January 2020 to July 2024. Looking at annual data (from July to June of the following year), the tax rates have seen a steady increase: 47.3 cents in 2019-2020, 50.5 cents in 2020-2021, 51.1 cents in 2021-2022, 53.9 cents in 2022-2023, and 57.9 cents in 2023-2024.
California’s high gas prices are the result of a combination of factors, notably the high gasoline tax. According to the State Senate Energy Committee, gas stations in Southern and Northern California switched to more expensive summer blend fuels in February and March to reduce ozone emissions, with winter fuel prices being lower than summer fuel prices.
In addition to the gasoline excise tax set to increase to 59.6 cents, California’s fuel taxes also include a federal excise tax of 18.4 cents, an underground storage tank fee of 2.0 cents, a fuel cap-and-trade sales quota (FUC) of 14.3 cents, and the California Low Carbon Fuel Standard (LCFS) of around 22.6 cents, bringing the total tax rate to over $1.15 per gallon.
Two years ago, under Governor Newsom’s strong advocacy, the legislature passed a law aimed at combating profiteering by major oil companies and strengthened daily oversight and inspections of these companies, yet gas prices continue to rise.
According to the California non-profit political news network CalMatters, at an Energy Committee hearing this month, Catherine Reheis-Boyd, Chair and CEO of the Western States Petroleum Association, voiced opposition to setting price caps on oil and penalizing oil companies. She argued that penalizing oil companies for high profits would lead to supply restrictions, driving up prices and producing the “exact opposite effect.”
Reheis-Boyd highlighted the high operating costs of operating refineries in California, which are 2-3 times higher than elsewhere in the world. From 43 refineries in 1982, California now only has 14 as of 2023. She urged legislators to consider investing more in the oil supply chain to increase supply and to lift restrictions on California’s crude oil production.