Is CA gas tax responsible for much higher gas prices here compared to other states? Let’s use those brain cells for good.
“The gasoline excise tax is a specific tax levied on the purchase of gasoline, primarily to fund transportation infrastructure projects such as road and bridge construction and maintenance.” [US Energy Information Administration]
According to the US Energy Information Administration (EIA), the Federal Gasoline Excise Tax is $0.184 per gallon and $0.244 for diesel fuel. This includes a minimal $0.001 for Leaking Underground Storage Tanks (LUST). On top of that, the average state taxes total adds $0.3261 for gasoline and $0.3476 for diesel fuel. So far, the facts.
America seems on a path of De-Intellectualization. This time, the plan here is to teach some critical thinking, which, according to AI-pessimists, will soon be a lost art. According to social-media-realists, it might already be too late.
Let’s look at claims often promoted by the fossil fuel lobby. As the story goes, California’s gasoline is so expensive because California is a small island state with a specialized “Boutique Blend” requiring the World’s cleanest gasoline, which no one else can produce. That’s what we are paying for.
The fact is, Californians do pay more for a gallon of gasoline than most of the other states, except maybe Hawaii. A quick look at AAA’s gas price report shows that in August 2025, the list looks something like this:
The US used to be good, even leading in doing Cost-Benefit-Analysis (CBA). Lobbyists changed that, so no jurisdiction around here seems to be doing CBAs for Transportation anymore. Instead, the industry lobby groups seem to be pushing the narrative of the Horrendously High CA Gas Tax. And most news reporters will just repeat that same story for clickbait. Few seem to be fact checking and are just repeating common narratives.
But is a higher CA Gasoline Excise Tax really explaining the higher cost in California?
Other States with Special Blends:
Critical Thinking:
Turns out California is not the only state with a special blend. Many states have different blends as well. And many of those states or areas are smaller and might not even have their own in-state refineries like CA.
Is the CA blend really so much more complex and so much more expensive to mix than these others? Is it so rare and so much cleaner that no one else can produce it the same way?
CA is a very small area requiring a very special “Boutique Blend” of gasoline which can only be produced by very few in-state refineries.
Critical Thinking:
Suddenly, economies of scale don’t seem to matter anymore. In some stories, California is this small isolated stretch of land where only a very special type of gasoline is used, which makes the production and transportation so much more expensive.
Now this might sound like a story that fits for island states like Hawaii or Puerto Rico. But this is California on the mainland. It likes to call itself the fourth or fifth largest economy in the world, which also makes it the fourth or fifth largest gasoline consumer. It has its own oil production and in-state refinery capacity. How special can a blend be if everyone in the fourth-largest economy is using that blend?
But wait, there is more. As it turns out, Arizona and Nevada are getting their gasoline also from California refineries. At least within the environment of these California refineries, optimized to produce CA’s boutique blend, NV and AZ would be the small-batch outliers. Their isolated blend within the fourth-largest economy, combined with the longer transportation routes, should make their blends more expensive.
But wait, there is more. Las Vegas and Phoenix require yet another blend than other counties in NV, AZ, and CA. But instead of creating yet another specialized and more expensive small-batch blend for NV, AZ, LV, or Phoenix, CA refineries are basically just shipping CA’s boutique blend to those cities as well. Somehow, that doesn’t seem to reflect in their prices too much. That alone would tell us that California’s “Boutique Blend” isn’t so special and not too expensive to create.
But wait, there is still more. Whenever CA is in trouble with getting enough gasoline from its refineries, it just imports it from South Korea, the UK, and others. That would tell us that the art of refining isn’t such an art at all, and can be fairly easily done in other refiners. Or in other words, we are not that special!
Alright, so if the economy of scale isn’t supporting the first two myths, how about the yearly Gas Tax Hikes here in CA? Surely they must be at fault then. This myth is even bigger than the other two.
Critical Thinking:
“In fiscal year 2013, the last year in which data is available, gas taxes and motor vehicle license fees paid for 41.4 percent of state and local road spending. That percentage is falling over time as state gas rates do not keep up with inflation.” [Tax Foundation]
According to the Tax Foundation and national and international research, we know that the gas tax has never paid for all of California’s car-centric infrastructure. The gas tax started some 30-40 years too late and was always too small. Primarily since the federal gas excise tax hasn’t been raised for over 30 years. States and federal jurisdictions always made sure to subsidize it through general funds and financed it through costly bonds and national debt.
This myth also goes hand in hand with two other myths. In those, it says people using public transit, bicycles, or EVs aren’t paying the gas tax and therefore also not paying their fair share. These two deserve some longer posts, so we keep those for later. But essentially no one has been paying their fair share.
“Gasoline Taxes and User Fees Pay for Only Half of State & Local Road Spending” [Tax Foundation, 2014]
But because of the EV myth, California politicians now want to switch away from taxing gasoline at the pump. They want everybody to pay Road Charges per mile instead. They created a pilot program to study and test a California Road Charge. The road charge for driving one mile in California would be between 2 and 4 cents per mile.
A lot of different stakeholders are watching this study. Industry lobbyists, AAA, consumer watchdogs, environmentalists, politicians, unions, etc. Now, the critical question here is, with all these stakeholders representing various sides, would they have chosen a number much different from the current gas tax? Would the number be smaller to attract more volunteers? Would it be higher to sneak in a tax increase?
During any study, you don’t want to change too many variables at once. Most likely, Caltrans would choose 2-4 cents, because that would reflect the cost of the gas tax. Any change to the current price could/would influence the outcome of the pilot study.
So far, we haven’t even looked at the numbers just yet. But critical thinking already tells us that something about these stories seems off.
AAA currently has the national average cost per mile at around $0.76. Here in the Bay Area, that is typically closer to $1.50-$2. The $0.03 per mile gas tax and environmental fees seem rather small and insignificant. Especially since that is the money that supposedly builds and maintains our infrastructure. And we only have to look at the current status of bridges and the amount of potholes to understand that 3 cents haven’t been enough for a long time.
The fact that Las Vegas and Phoenix are using the same blend of gasoline produced in the Bay Area and still don’t share our prices does not explain the price difference between our cities and states.
Neither story nor narrative explains the price differences of $1-2 per gallon. Next time around, we will be looking at more numbers.
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