California chose high electricity prices – not Trump, or Iran

California has missed out as the United States has become a global power.

The US is the world’s No. 1 producer and exporter of natural gas, and the No. 1 producer and No. 3 producer of oil.

We are also world leaders in promising new and clean energy technologies, including nuclear.

Our massive force has helped our European allies keep the lights on since Russia’s war in Ukraine.

And while markets go up and down, our energy boom is reflected in low US energy prices.

By 2024, US gasoline prices after taxes were 20 percent below the global average. US natural gas prices – essential for power plants, industry, and homes – are now three to four times cheaper than those in Europe or Japan.

California, unfortunately, missed out on much of that benefit.

Take gasoline, which now costs $25 more for a 15-gallon fill-up in California than in the rest of the US.

That premium is the result of California’s own policy decisions.

State-specific taxes add 44 cents per gallon — about $7 per fill — above the national average.

State-specific climate policy payments, including from the Cap-and-Trade program (now Cap-and-Invest), and the Low-Carbon Fuel Standard for biofuels, add another $5-7.

And California’s special fuel blends, intended to reduce emissions but not compatible with other US and global fuel markets, add another premium.

The growing regulatory burden and cost of doing business for fuel suppliers in the state is pushing up fuel prices, too.

Gas stations have also consolidated, reducing competition.

Meanwhile, California’s refining capacity is down 14 percent, from 1.91 to 1.64 million barrels per day from 2020 to 2025, according to the US Energy Information Administration.

The balance is increasingly filled by imports. There are 12 remaining California refineries, and one will close this spring.

Gov. Gavin Newsom actually celebrated on social media when oil giant Chevron moved its corporate headquarters from the San Francisco Bay Area to Texas in 2024, even though the company still operates two major factories in the state.

A recent letter from its executives to regulators warned of rising fuel prices if Cap-and-Invest rules become too strict.

Unfortunately, the state has a poor record of heeding such warnings.

While University of Pennsylvania analyst Danny Cullenward warned regulators in 2024 that the planned expansion of the Low Carbon Fuel Standard could add 85 cents per liter to fuel prices by 2030, the agency argued that it is impossible to estimate the costs of its rules.

The truth is that the California government has options to cut costs without abandoning environmental goals.

California’s “Cap-and-Invest” program, in which emissions permits are auctioned off to a state entity, has generated more than $35 billion in revenue since 2013.

Electric consumers are getting a refund — about $116 per household last year, for Pacific Gas & Electric customers.

But for refined oil, the proceeds go to the Greenhouse Gas Reduction Fund — essentially a slush account where, by law, one-quarter finances California’s unpopular high-speed rail project.

Would most Californians today be willing to add a dollar every time they fill up to go on the high speed train?

If the state wants to increase the Cap-and-Trade auction, those new funds can be used to lower the gas tax, not to pay for the train to nowhere.

Another option: California could reconsider the requirement for its special gasoline blend, which has been in place since the 1990s.

No good cost analysis exists for this requirement, and its environmental benefits may have been reduced, given today’s hotter car engines.

Finally, we don’t need both Cap-and-Invest and the Low Carbon Fuel Standard, which costs about 15 cents per gallon – or another $2 per tank.

We have to remove the standard, if we keep the emission permit system.

High gas prices and California energy are not Trump’s fault, or Iran’s fault, or Russia’s fault. They are optional – and we can choose differently.

David Fedor is a Stephenson Policy Fellow at the Hoover Institution.

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