Sylvie Willis
Gas prices have been a significant concern for many people, with 86% of American adults worried about the price of gas in the future. In California, there was a 65-cent hike in gas prices expected in July 2025, but experts predict that the actual increase will be between 5 and 9 cents per gallon. This is due to an increase in the state's excise gas tax, which is expected to be 61.2 cents per gallon, up from 59.6 cents. The national average gas price in the US as of July 2, 2025, was $3.171 per gallon, down from $3.500 a year prior. Gas prices are influenced by various factors, including the switch to summer-blend gasoline, which is more expensive to produce, and global conflicts impacting oil prices. UK energy prices dropped by 7% on July 1, 2025, providing some relief to households.
| Characteristics | Values |
|---|---|
| California's excise gas tax increase | 1.6 cents per gallon |
| Previous excise tax rate | 59.6 cents per gallon |
| New excise tax rate | 61.2 cents per gallon |
| Average gas price in California as of June 30, 2025 | $4.59 per gallon |
| Average regular gas price in the U.S. as of July 2, 2025 | $3.171 per gallon |
| Average per-gallon price of regular gas in 2019 | $2.601 |
| Peak average per-gallon price in 2022 | $5.016 |
| Average monthly gas cost across the 50 US states in 2022 | $177.85 |
| UK energy price cap as of July 1, 2025 | £1,698 a year |
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What You'll Learn
California's gas tax increase
California's gas prices have been a topic of concern for its residents, with the state already having some of the highest fuel costs in the country. In 2025, there was a proposed increase in the state's gas tax, which has sparked debates and concerns.
The California Department of Tax and Fee Administration announced in June 2025 that the state's excise tax on gasoline would increase by 1.6 cents per gallon starting July 1, 2025. This meant that the tax rate per gallon would be 61.2 cents, up from the previous rate of 59.6 cents. Additionally, there were changes to the state's Low Carbon Fuel Standard (LCFS), which is not a tax but a regulation aimed at reducing air pollution and greenhouse gas emissions. The LCFS was first established by Republican Governor Arnold Schwarzenegger and has undergone amendments over the years.
The California Air Resources Board (CARB) has stated that the LCFS is estimated to increase fuel costs by 5 to 8 cents per gallon, contrary to claims that it would raise prices by 65 cents per gallon. The LCFS is expected to reduce fuel costs for Californians in the long term, with a projected savings of over $20 billion in gasoline costs annually by 2045. The increased excise tax, on the other hand, is expected to result in higher costs for consumers for various goods and services.
The Democrats have been accused of choosing "higher gas prices over hardworking Californians", while the Republicans have been criticized for spreading misinformation about the gas price increases. The gas tax increase was enacted by the Legislature in 2017 to fund road repairs and was approved by voters in 2018 when they rejected a repeal attempt. Despite the concerns, gas prices in California and across the US have been steady during the July 4th holiday travel week, with prices even dropping slightly from the previous week and month.
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Global oil price fluctuations
Global oil prices are influenced by a multitude of factors, resulting in a volatile market with frequent fluctuations. These factors include:
Supply and Demand
The fundamental economic principle of supply and demand significantly influences oil prices. When demand exceeds supply, prices tend to increase, and when supply surpasses demand, prices may decrease.
Geopolitical Events
Political tensions, conflicts, and wars in oil-producing regions can disrupt the supply chain and cause significant price surges. For example, the Russia-Ukraine conflict impacted energy markets, contributing to price surges in 2021 and 2022. Similarly, escalating tensions between Israel and Iran, with Israel targeting Iran's energy infrastructure, threaten global energy markets and highlight the region's volatility.
Economic Fluctuations
The economic performance of countries and global economic indicators play a role in oil price fluctuations. Economic growth typically drives up oil demand, leading to higher prices. In contrast, recessions or slowdowns can reduce demand and result in lower prices.
Weather Conditions
Weather conditions, particularly extreme weather events, can impact oil production and transportation. For example, hurricanes or storms might cause temporary disruptions, leading to a spike in prices.
Seasonal Variations
Gas refineries undergo a transition from winter-blend to summer-blend gasoline, which is more expensive to produce, during the spring and summer. This transition contributes to higher gas prices during those seasons.
Government Policies and Taxes
Government policies and taxes can also influence oil prices. For instance, California's Low Carbon Fuel Standard aims to reduce air pollution and greenhouse gas emissions by setting targets for carbon reduction in transportation fuels. This regulation has led to concerns about potential gas price increases for consumers.
In summary, global oil price fluctuations result from a complex interplay of economic, geopolitical, environmental, and regulatory factors. These influences contribute to a dynamic and unpredictable energy market, with prices varying over time and impacting consumers worldwide.
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Summer-blend gasoline
The primary reason for using summer-blend gasoline is to control volatility and reduce emissions during the warmer months. Warmer temperatures can cause gasoline to evaporate more easily, leading to increased emissions of volatile organic compounds (VOCs) and contributing to ground-level ozone and smog. Summer-blend gasoline has a lower Reid Vapor Pressure (RVP) than winter-blend gasoline, which means it is less volatile and less prone to vaporization at high temperatures. This helps to mitigate evaporative emissions and improve air quality, particularly in urban areas that are already struggling with pollution.
The transition to summer-blend gasoline typically occurs between May 1 and June 1 each year, with sales of higher-RVP winter-blend gasoline resuming after mid-September. This transition period allows refineries to adjust their production processes and ensure that all gasoline available at retail outlets meets the summer specifications by June 1. The formulation of summer-blend gasoline often requires more intensive processing and the use of different components, which can increase the cost of production and lead to higher gas prices during the summer months.
In California, the switch to summer-blend gasoline occurs earlier and must be used for a longer period. California has implemented the California Reformulated Gasoline Program to reduce air pollution and greenhouse gas emissions, which sets declining targets for carbon in transportation fuels. Additionally, California's excise gas tax increased by 1.6 cents per gallon on July 1, 2025, contributing to a potential increase in gas prices in the state.
While the use of summer-blend gasoline is essential for environmental and performance reasons, it can result in higher prices at the pump. The transition to summer-blend gasoline is just one factor that can impact gas prices, which are also influenced by economic disruptions, global conflicts, and supply and demand dynamics.
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Energy price caps
The energy price cap was introduced on 1 January 2019 by the regulator Ofgem, with the aim of preventing the millions of households on expensive variable tariffs from overpaying. The price cap limits what consumers pay for each unit of gas and electricity they use and sets a maximum daily standing charge, which is what consumers pay to have their home connected to the grid.
The actual rates charged to consumers depend on where they live, how they pay their bill, and the type of meter they have. Changes to the costs included in the price cap will affect the level of the price cap. For example, if the amount a supplier has to pay goes up, the level of the price cap will also increase.
The latest changes to the price cap mean variable tariffs for a customer who pays by direct debit are as follows: Gas prices are capped at an average of 6.33p per kilowatt hour (kWh), down from 6.99p. Electricity is capped at 25.73p per kWh, down from 27.03p. Standing charges vary by region but have fallen on average to 51.37p a day for electricity and 29.82p a day for gas.
On 1 July 2025, the price cap fell by 7% to £1,720 a year from £1,849 a year for a typical household paying by Direct Debit. This decrease is predicted to be short-lived, with the cap expected to rise again in October 2025.
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Electric vehicles
As of July 2025, the average price of gas in the US is $3.171 per gallon, down from $3.500 a year ago, though prices have been fluctuating in recent weeks. In California, the average price of gas is $4.59 per gallon, which is about $1.40 higher than the national average. These prices are affected by the ongoing conflict between Israel and Iran, as well as the switch to summer-blend gasoline, which is more expensive to produce.
With rising gas prices, electric vehicles (EVs) are becoming an increasingly attractive alternative to traditional gasoline cars. While the upfront cost of an EV may be higher, the long-term savings on fuel and maintenance can make it a more economical choice. A 2018 study by the University of Michigan's Transportation Research Institute found that the average cost to fuel an electric car was $485 a year, compared to $1,117 for a gas-powered vehicle. Additionally, federal incentives and rebates for EV purchases can further reduce the cost.
However, the cost of recharging an EV can vary significantly depending on factors such as geography, charging behaviour, and electricity rates. For example, electricity rates can differ by state, time of day, and outlet, with fast chargers typically costing a premium. On the other hand, many electric utilities offer lower rates for charging during off-peak hours, and EVs can be programmed to take advantage of these lower rates automatically.
The environmental benefits of EVs are also a significant factor in their growing popularity. With governments and companies moving towards carbon neutrality, EVs can help reduce air pollution and greenhouse gas emissions. California's Low Carbon Fuel Standard, for instance, aims to reduce emissions from transportation fuels, with producers who don't meet benchmarks buying credits from those who do.
Overall, while the fluctuating gas prices may impact the decision to switch to electric vehicles, there are numerous other factors to consider, including the environmental impact, the potential for long-term cost savings, and the improving affordability of EVs as the market expands.
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Frequently asked questions
As of July 1, 2025, California's excise tax on gas increased by 1.6 cents per gallon, bringing the tax rate per gallon to 61.2 cents. This increase is expected to result in a rise in gas prices for consumers.
Gas prices tend to be higher in the spring and summer due to the switch to summer-blend gasoline, which is more expensive to produce. Additionally, global conflicts, such as the Russia-Ukraine war, can impact oil prices and subsequently affect gas prices.
As of July 2, 2025, the average regular gas price in the US is $3.171 per gallon, according to AAA. This price is lower than it was a year ago but slightly higher than a month ago.
