California Drivers Brace for 2025 Gas Price Hike—Here’s What to Expect

California drivers are bracing for 2025 as a contentious emissions initiative is set to drive gas prices significantly higher.

The California Air Resources Board (CARB) estimates that the Low Carbon Fuel Standard (LCFS),¹ a rule encouraging the use of cleaner fuels by forcing companies to lower the carbon pollution from their products, will raise gas prices by nearly 50 cents per gallon by 2025 and an additional 52 cents by 2026.

Here are the factors behind the looming gas price crisis, and explore what, if anything, can be done to mitigate the impact on California’s economy and way of life.

Balancing Environmental Goals & Economic Impact

While the LCFS aims to reduce greenhouse gas emissions and promote the switch to renewables and green energy, lawmakers are sounding the alarm about the potential economic impact on consumers. 

The debate over balancing environmental goals against the financial burden on Californians will heat up as the state grapples with the consequences of its ambitious climate policies.

Proposed Legislation for Fuel Reserves

To prevent sudden increases in gasoline prices, especially during the late summer months when demand tends to surge, Governor Gavin Newsom is championing legislation that would empower state energy regulators to establish mandates for fuel companies to maintain specific fuel reserves. (ref)

The bill, which has advanced in the California state Assembly, aims to utilize existing storage capabilities to avert abrupt price hikes when refineries halt operations for maintenance.

Debate over Potential Consequences

Supporters of the bill argue that it could lead to substantial savings for Californians at the fuel pump, potentially saving billions of dollars. 

However, critics warn that the measure might inadvertently elevate overall gas prices and jeopardize worker safety by increasing state control over refinery maintenance schedules, as postponing essential maintenance could result in accidents.

Settlement Details & Eligibility

Amidst the looming gas price hikes, there may be a glimmer of hope for some California residents. 

Attorney General Rob Bonta (ref) is urging Californians who purchased gas in Southern California between February 20, 2015, and November 10, 2015, to submit a claim for a payment under the state’s settlement with gas trading firms accused of tampering with and manipulating gasoline prices.

Claim Process & Potential Benefits

Eligible Californians who purchased gasoline in Los Angeles, San Diego, Orange, Riverside, San Bernardino, Kern, Ventura, Santa Barbara, San Luis Obispo, and/or Imperial counties during the specified time frame may submit a claim online. 

The amount each claimant will receive is yet to be determined and will depend on the number of claims submitted.

Election Season Strategy

As the 2024 election season approaches, some see Governor Newsom’s focus on addressing high gas prices in California as a political maneuver. 

By calling a special legislative session to tackle gasoline price spikes, Newsom ensures that the debate about California’s high energy prices remains in the spotlight throughout the election season.

Addressing Underlying Factors

While Newsom’s proposal to give the California Energy Commission the ability to mandate refiners to keep more supplies on hand may help mitigate price spikes, it does not address the underlying reasons for California’s consistently higher gas prices compared to the rest of the nation. 

These factors include the state gas tax, environmental programs like cap and trade, the low-carbon fuel standard, and the remaining price gap investigated by the Energy Commission.

Source:

1. Kleinman Center for Energy Policy