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Below are the monthly updates from the most current July 2025 fuel price data (GasBuddy.com) and April 2025 electricity and natural gas price data (US Energy Information Administration). To view additional data and analysis related to the California economy visit our website at www.centerforjobs.org/ca.

Average energy prices remained the highest among the contiguous states and DC for electricity and fuels, while average residential natural gas rates notched up to the third highest.

California’s by-now secured position with the highest electricity costs appears to be an overlooked consideration in the most recent round of self-congratulations among the state’s leadership on the state’s increasing use of renewable generation sources. These announcements have concentrated on the state reaching new goalposts in its use of renewable generation along with attendant effects on emissions, but fail to note—as we do below—that the average state residential rate is now 101.3% higher than the average for all other states, commercial rates are 111.2% higher, and industrial rates 183.3% higher. As renewable generation has grown, so have the costs paid by households, businesses, and governments. In the chart below, the Renewables Share includes small hydro but not large hydro and nuclear in order to conform to the state’s Renewable Portfolio Standard restrictions.

Effective July 1, additional state taxes and fees were applied to the cost of fuels. State excise tax increased on both gasoline (1.6 cents) and diesel (1.2 cents). The Air Board’s higher cost amendments to the Low Carbon Fuel Standard (LCFS) also were finally allowed to become operative. 

As provided in our new series on LCFS costs from OPIS (see below), the tighter standards under the new regulations saw the LCFS component jump 72% for gasoline and 88% for diesel. With only one month’s worth of data, however, there is no clear pattern as yet showing the effect on pump prices. Using price data from US Energy Information Administration as used by the Energy Commission, the spread in prices between the US and California for regular gasoline was 16.3 cents higher in July compared to the same month in 2023. For diesel, the spread was 6.6 cents higher. The incremental cost for LCFS combined with the higher excise tax was 7.1 cents for gasoline and 8.5 cents for diesel, but other factors likely affect the July outcomes that can only become apparent with other data points.

What is clear is that LCFS costs are being heavily moderated by one overarching factor, the substantial number of banked credits that has been built up in recent years. While the regulations require fuels to use increasing credits, prices for those credits have consequently been low, with prices driven even lower recently due to the previously-uncertain future for these rules. For example, the LCFS cost component from OPIS for gasoline was 13.2 cents a gallon in July. At credit prices that prevailed at the beginning of the year, the cost instead would have been 15.8 cents. At credit prices seen in 2020 and the first half of 2021, the cost impact would have been much higher at 44.4 cents a gallon. At the allowable maximum price this year under the regulations, the cost impact would have been 60.6 cents a gallon.

Banked credits instead have been soaring since 2023, producing a strong dampening effect on the market and providing the Air Board with breathing space in which to claim, at least for now, that the stricter rules have had little effect on prices. In their most recent report, banked credits grew by 2.8 million in the first quarter to a total of 40.2 million, or the equivalent alone of a full year’s worth of demand based on the 2024 data and 2025 target carbon intensity (CI). As the target CIs increase, however, this stock will be drawn down rapidly and instead push off the price reckoning to a future governor and legislature.

How long with this price dampening effect last? A complete answer would have to take into account a great many different factors, but the following calculations can provide a reasonable ballpark estimate:

• The Base Case assumes both that credits will be generated at the same level they were in 2024 and that fuels consumption will remain at the same level as well. Only diesel and gasoline are considered as they are the dominant fuels subject to LCFS. Applying the CI targets under the rules and assuming the Automatic Acceleration Mechanism is not triggered, the current banked credits would be exhausted just prior to the gubernatorial elections in 2030. Price effects, however, would likely begin rising rapidly well before this point, as would also be the situation with the following alternative cases. As shown in the previous charts, downward pressure on prices accelerated once banked credits reached a sustained level above the equivalent of 2.2 times the quarterly demand. In this calculation, that point would be reached and the price effect would begin reversing in 2028. At the same time, total LCFS costs would be increasing regardless of price as the rules require an increasing number of credits per gallon each year.
• The Lower Fuels Case changes the assumptions to see the effect of a 5% annual reduction in fuel demand (compared to 4.1% decline in 2024). While electric vehicle sales have stalled and even retreated in the most recent results, consumers are increasingly buying hybrids—both battery and plug-ins—that likely will have an effect on total fuel consumption going forward. Under this revised assumption, the banked credits again run out in 2030. The 2.2 price threshold is also breached in 2028.
• The final Lower Fuels/Higher Credits Case also assumes 10% more credits will be created each year. This change has a somewhat greater effect, but the banked credits still are stretched out only an additional 2 years, just prior to the 2032 presidential elections. The 2.2 price threshold is also breached 2 years later in 2030. However, while credit generation is likely to expand to some extent, so will demand as 3 other states have adopted an LCFS program and 5 others are currently considering one.

In July, total LCFS Cap & Trade charges incorporated in the price Californians pay for fuel grew as the stricter regulations became effective, while the Cap & Trade component also showed a marginal increase. The costs shown in the table are for the penultimate month-to-date numbers from the OPIS Carbon Market Report, adjusted to incorporate state and local sales tax to account for the full additional costs imposed by these regulatory fees on fuel buyers. Certain Data or Information Provided By: Oil Price Information Service, LLC. Distribution of OPIS data without permission from OPIS is prohibited.

Combining the OPIS data (without the sales tax component) with the previous Energy Commission estimates, Cap & Trade costs have been easing, while LCFS costs had been rising before June but reversed course under the new regulations. Note that both charts include both the Cap & Trade components charged at the rack and levied on production from the OPIS data, and only the rack component in the Energy Commission data.

Average prices ($ per thousand cubic feet; 12-month moving average) for the 12 months ended May 2025 and changes from the previous 12-month period for each end user: