California Drivers Brace for Higher Gas Prices This Summer as Tax Hike, Refinery Closures, and Global Tensions Converge

California drivers could see continued pressure at the pump this summer as the state fuel excise tax — more commonly known as the gas tax — rises, refinery closures tighten supplies and global tensions create uncertainty in energy markets.

Beginning July 1, California's gasoline excise tax will increase from 61 cents to 63 cents per gallon, while the diesel tax will rise from about 47 cents to 48 cents per gallon. State officials say the revenue supports transportation infrastructure projects, including road and bridge repairs. The automatic annual adjustment is tied to inflation, a mechanism that has drawn both support and criticism over the years.

Governor Gavin Newsom and state leaders have defended the tax, noting that voters had the opportunity to repeal it in 2018 but chose not to. Still, the increase arrives at a particularly strained moment for the state’s fuel market.

Industry analysts say the tax increase alone is unlikely to cause a noticeable jump in retail fuel prices.

“California motorists have the most pain at the pump, and taxes are just one source of that underlying pain,” said Patrick De Haan, head of petroleum analysis at GasBuddy. “Smaller gas tax changes may not necessarily be visible at the pump when they’re implemented.”

The tax increase comes as state energy officials continue monitoring potential disruptions tied to conflict involving Iran and concerns about shipping through the Strait of Hormuz, a critical route for global oil supplies. That instability, combined with tightening domestic refining capacity, has put additional upward pressure on wholesale prices.

Siva Gunda, vice chair of the California Energy Commission, said state officials currently have six to seven weeks of visibility into fuel supply conditions. However, he emphasized that short-term estimate doesn't imply California will run out of fuel.

“That’s the visibility we have,” Gunda said. “That doesn’t mean we’ll run out of supply in California.”

California faces unique fuel supply challenges because of its relative isolation from other domestic fuel markets and its specialized fuel requirements. Gunda called California an oil “island” of sorts. Thus, the state relies on a combination of in-state production and imports to meet demand.

Imports have become increasingly important following the recent closure of two California refineries, which officials say reduced in-state refining capacity by about 20%.

“Imports are continuing to increase,” Gunda said. “As the supply gets tight in California, the price will go up and attract more imports.”

Diving into the specifics, Gunda added, about 75% of California's crude oil is imported from out of state. About 10% of that comes from other U.S. states, with the remainder coming from overseas, including Latin America. California also imports already-refined, ready-to-use gasoline. In addition to gasoline from the Northwest and Gulf Coast in the U.S., the imports come from the Bahamas, as well as India, South Korea, Japan and other Asian markets.

As the state relies on imports for the foreseeable future, Gunda says, the big question is whether there are enough refineries globally that can produce the California-specific blend, and if we can physically get that product to our state.

The refinery closures have fueled debate among policymakers, industry representatives and environmental advocates about California’s transition away from fossil fuels. The state has set a goal of achieving carbon neutrality by 2045, a shift that some industry observers say has made operating conditions more difficult for refiners.

“California, potentially at the worst possible time, has seen the loss of two refineries,” De Haan said, adding that if California were serious about reducing greenhouse emissions, it would refine more in-state, rather than overseas. De Haan, as those in the petroleum industry have repeated, argues California mandates some of the cleanest refining standards.

Republican state Sen. Tony Strickland questioned how the state’s long-term climate goals will affect consumers.

“What will that mean for an average California family of four in that transition and those goals?” Strickland said, noting that affordability remains a key concern to balance with those aspirational goals.

Despite concerns about refinery capacity and international market uncertainty, De Haan said he does not foresee a supply crisis in California.

“California’s gas supply is not something that keeps me up at night,” he said.

Still, analysts caution that stable supplies do not necessarily translate into lower prices. Consumers can reduce fuel costs by comparing prices through navigation and fuel-tracking apps and by adopting fuel-efficient driving habits, De Haan said.

State regulators, including the California Air Resources Board, continue to face scrutiny from lawmakers, the petroleum industry and environmental groups as they navigate the state's energy transition and its impact on fuel affordability.

No one from the CEC was available for an interview on Monday. The agency sent ABC10 a statement, which said in part, "The California Energy Commission (CEC) is in close communication with all in-state refiners about transportation fuels supply during this volatile period of supply contraction. California’s gasoline needs are being met through a combination of refinery production, inventories, and imports from various sources, and the state is tracking conditions in real time to support fuel market stability. Despite the closure or idling of a couple refineries in the past year, supply of gasoline in California remains strong and the increased prices are a result of the Iran conflict. Given the highly dynamic and fluid nature of the current global oil disruption, the CEC’s supply outlook reflects the outer limit of what can be reliably forecasted. Not unlike weather forecasting, there is a finite window of forecasting based on available data and its reliability."

The agency added, "The CEC’s projections show supply sufficient to meet demand through roughly the next six weeks, which is the current window of reliable forecasting, under normal operating conditions, assuming no major unplanned outages. The CEC remains cautiously optimistic about the supply forecast beyond the six-week window."

We also reached out to the governor's office to weigh in on De Haan's statement that California is not reducing its pollution footprint simply by turning to global imports.

CARB responded on the governor's behalf, writing in part, "California is committed to ensuring liquid fuel supply remains reliable, affordable, and resilient throughout the transition to carbon neutrality. At this stage, imports are helping the market meet consumer demand. CARB already accounts for the lifecycle emissions of imported gasoline in our transportation sector-related assessments. The data shows that many of the state’s oil fields have higher carbon intensity than imports due to the more energy-intensive extraction process they require."

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