Global conflicts like the current wars in the Middle East and Ukraine can spike gas prices in California and throughout the country. To make matters worse, fossil fuel polluters are using this opportunity to disingenuously blame the state’s climate policies and public health protections for recent price increases.

On the contrary, California is more resilient to global price shocks due to strong programs like Cap and Invest and the prudent spending of the revenues it generates. California has made strides in reducing fossil fuel demand over the past few decades as our grid, homes and cars are increasingly powered by domestic, clean electricity.

Continuing ambitious climate and clean energy policies, like Cap and Invest, is critical to protecting the lives—and pocketbooks—of Californians.

Global events, local impact

The Iran war is occurring far from California, but it is undoubtedly a primary cause of the recent gas price spikes that are hitting drivers close to home.

Data from the U.S. Energy Information Administration shows that the largest component of gasoline prices and the main source of price volatility is the price of crude oil, which made up 55% of the cost of a gallon of gas over the last decade.

California gets about a quarter of its crude oil from the Middle East, which is obviously being impacted by multiple wars. And while the US is a net exporter of petroleum, because crude oil prices are set on a global market, prices for oil and petroleum products are spiking dramatically everywhere, regardless of where they come from.

The extreme volatility of crude oil globally is why gas prices are, well, extremely volatile.

What else determines the price of gasoline?

If the price of crude is responsible for more than half of the cost of a gallon of gasoline, what makes up the other half? The answer is straightforward…to a point.

In January, when gasoline in the state was $4.01 per gallon, the price of crude oil accounted for $1.60, refining and distribution margins were $1.09, state and federal taxes and fees were $0.90 and environmental programs were $0.42. The math is simple, but there is a mystery hiding in the refining and distribution margins.

Since 2015, California consumers have also been saddled with what Berkeley Professor Severin Borenstein has described as the Mystery Gas Surcharge (MGS).

The MGS is the difference between California and rest of US retail price after removing taxes and other cost differences. Professor Borenstein’s recent post notes the MGS was “about $0.57 in Feb, before attack on Iran. Based on AAA info, today it’s just over $1.”

Oil companies love to complain about the 42-cent environmental programs, but the MGS is a bigger, non-transparent part of the cost of California gasoline that you don’t hear the oil companies talk about.

California’s rules protect air breathers and consumers

Decades ago, toxic air pollution—largely from cars and trucks—was causing smog and driving a public health crisis in California. Concerns about this pollution led Governor Ronald Reagan to successfully advocate that President Richard Nixon allow California to regulate vehicles more stringently than the federal government.

This authority was the basis of countless life-saving regulations that made cars and trucks in California cleaner, more fuel-efficient, and, ultimately, zero-emission. These safeguards reduced toxic air pollution and heat-trapping emissions and also had the significant co-benefit of decreasing the state’s reliance on gasoline.

California’s protections have resulted in California’s gasoline demand dropping about 15 percent since its peak in 2005. In addition to the clear pollution and public health benefit of reduced reliance on gasoline, this reduced demand protects consumers from the likely price volatility caused by global events like war and extreme weather events.

The state has gone from a maximum of 15.6 billion gallons used in 2017 to 13.2 billion gallons in 2025. That’s over 2 billion gallons in reduced gasoline use and $14 billion per year in avoided spending at the current price of $5.82 per gallon. On average, that breaks down to about 60 fewer gallons of gasoline per Californian and more than $350 extra in each of their wallets.

And while the state reduced its gasoline consumption by 2 billion gallons, California’s economy substantially, becoming the world’s fourth largest economy last year.

Keep capping and investing

You wouldn’t know it from the billboards the oil industry is plastering around Sacramento, but in stark contrast to the major, volatile, and mysterious costs associated with crude oil and industry profits, California’s Cap and Invest program accounts for only 25 cents to the overall price of gas. And unlike crude oil prices and refiner margins, it remains a small, stable and predictable cost that improves the lives of Californians.

Like setting up an automatic 401k contribution, Cap and Invest is a reasonable investment that funds cleaner vehicles and related infrastructure, reduces electricity prices, and advances climate solutions. All these investments work together to make California and its residents more resilient in the face of local, state, national and global events.

Conversely, skyrocketing crude prices and refiner margins line the oil industry’s pockets and help fund misinformation campaigns against the state’s critical climate programs.

Updates to the Cap and Invest program are in the midst of being finalized by the California Air Resources Board. This process must move forward without delay to provide the state the resilience it needs to weather the storm of global supply constraints, hostile federal administrations, and disingenuous polluters.

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