As a California-based fuel and lubricant supplier, we know how difficult the ever-increasing price of fuel has been for our customers. Unfortunately, in California, expensive gasoline and diesel are par for the course. Our state has the highest fuel taxes in the country, and they continue to rise yearly. In 2024, California drivers paid $1.75 more per gallon of gas than the national average. This past June, the state excise tax on gasoline rose 2 cents per gallon to 59.6 cents to match inflation. This increase is part of a rising trend that has seen the state’s tax rise every summer since 2019. According to CalTrans, Californians pay an average of $300 yearly on fuel tax.

California’s Gas Tax Landscape
The recent fuel tax increase is hitting people hard, and many are questioning the value of the increases. The state excise tax is designed to go back into the community for highway and road repairs. Currently, about 80% of the tax pays for road upkeep. The SB X1-2 gas tax, which replaced the Road Repair and Accountability Act in June 2023, is designed to raise $52.4 billion over ten years, with $400 million going toward bridges and culverts, $200 million toward local entities, and $100 million toward bicycle and pedestrian projects. In the first quarter of 2024, the tax raised $2.2 billion, which was about 3.5% of the state’s total tax revenue for the first quarter of 2024, according to Axios San Diego.

While the state taxes are meant to go back into the community to maintain our transportation system and roads, they’re not the only taxes motorists pay at the pump. In addition to California’s high state tax, consumers also pay the federal excise tax of 18.4 cents per gallon. When you add both these taxes and the cost of fuel, Californians have the most expensive gasoline prices per gallon in the country.

Tensions Between the Petroleum Industry and Policymakers
Naturally, consumers are beginning to get frustrated with the rising fuel costs, and the current political landscape in California is fueling the frustration. A chasm between the petroleum industry and the state government has led to a war of words, with each side accusing the other of profiteering and driving the rising fuel costs. Governor Gavin Newsom has accused petroleum companies of “lying and gouging Californians to line their own pockets.”

However, the petroleum industry is fighting back. It has begun to release information that showcases the difficulties they face operating in California and the burdensome role the state’s fuel taxes have on consumers. A recent chart outlining California’s gasoline price breakdown and margins provides valuable insight into how fuel prices are set and how taxes and policies affect the overall price consumers pay at the pump. Here’s how it breaks down:

  1. Crude Oil, $2.06: The price of crude oil determines the most significant portion of the cost of gas. This price is determined by the global market price of crude oil, which fluctuates based on supply and demand dynamics, geopolitical tensions, and other factors influencing the oil market. For example, the pandemic, the war in Ukraine, severe weather and overall inflation in recent years have driven crude oil prices higher.
  2. State Excise Tax, 59.6 Cents: California’s state excise tax is 59.6 cents, and it increased in June to meet inflation.
  3. Refinery Costs and Profits, 58.0 Cents: Refinery costs, including the profit margins for refining companies, add another 58 cents per gallon. This portion covers the expenses related to processing crude oil into gasoline and includes refineries’ profits from this conversion.
  4. Distribution and Marketing 51.0 Cents: This portion covers the cost of distributing gasoline from refineries to gas stations and marketing expenses. It also covers the logistics of transporting fuel across the state and the costs associated with advertising and selling gasoline.
  5. Environmental Programs, 51.0 Cents: California’s commitment to ecological sustainability comes with significant costs. Environmental programs, including the state’s cap-and-trade and Low Carbon Fuel Standard (LCFS), are designed to reduce greenhouse gas emissions by requiring fuel suppliers to purchase credits or allowances to offset their carbon footprint.
  6. Federal Excise Tax, 18.0 Cents: This excise tax funds the maintenance and construction of the country’s highways and transportation infrastructure.
  7. State and Local Sales Taxes, 10.0 Cents: State and local sales taxes contribute another 10 cents per gallon. These taxes vary by region but are generally applied as a percentage of the price, further increasing the overall cost of gasoline.
  8. Underground Storage Tank Fee – 2.0 Cents: This fee, which began in 1991, helps fund the cleanup of leaks from petroleum storage tanks, protecting California’s groundwater resources.

Letter to the California Energy Commission
As a California-based fuel company, Chevron has been affected by the state’s ongoing taxation and industry policies that have limited future investment in the petroleum industry. In a May letter to the California Energy Commission, Andy Walz, president of Chevron Americas Products, summarized how the June 2023 California Senate Bill SB X1-2 would affect the industry. He outlines several significant points, including:

  • SB X1-2 will reduce gasoline supply, leading to higher prices and reduced refinery investment in California, leaving the state dependent on imported fuel.
  • The state’s refinery policies are too restrictive and will lead the industry to stop investing in new refinery infrastructure. Currently, only 11 active refineries are in the state, responsible for producing 90% of the state’s fuel.
  • Effective solutions to lower carbon emissions and reduce the environmental impact of the petroleum industry will be hampered without the government’s willingness to engage with the industry and work together to find solutions.

Walz’s letter details the effect of current state policies and tax setup on the industry and consumers. But we’re already seeing the impact of the state’s policies on the company. Chevron has already announced that it plans to move its company headquarters from San Ramon, California, to Houston before the end of 2024. Additionally, Chevron has also set up the Chevron Advocacy Network to alert consumers to the state’s fuel tax policies. Signs with QR codes linking to the Chevron advocacy site, which contains information for consumers on fuel tax policies, can be found at Chevron stations.

We’re here to help
As a California fuel and lubricant supplier, we know how challenging the current climate is for many business owners. Your business’s fuel costs are increasing monthly expenses, and we want to help. We offer several tools that may help lower your costs, including wholesale fuel orders, fleet fueling programs, and preventative maintenance programs like oil analysis to keep your fleet and equipment in tip-top shape. If you’re concerned about your fuel costs, speak to your Greg’s Petroleum representative to see if our programs may help!