Do Washington State Residents Know Why Their Gasoline Prices Are So High Now? (2024)

Roger Caiazza

Recent reports note that gasoline prices in the State of Washington are now higher than California. This is also the first year of Washington’s cap-and-invest program a “comprehensive, market-basedprogram to reduce carbon pollution and achieve the greenhouse gas limits” set in the Climate Commitment Act. This post asks whether residents have connected that program to the cost increase.

Washington Climate Commitment Act

Although a bit late to the party for addressing the threat of climate change, Washington’s Climate Commitment Act appears to be even more aspirational than California and New York. The Washington Department of Ecology (“Ecology”) web page explains:

The Climate Commitment Act (CCA) caps and reducesgreenhouse gas (GHG) emissionsfrom Washington’s largest emitting sources and industries, allowing businesses to find the most efficientpathto lower carbon emissions. This powerful program works alongside other critical climate policies to help Washington achieve its commitment to reducing GHG emissions by 95% by 2050.

The state plans in Washington, California, and New York all aim for net-zero emissions where greenhouse gas (GHG) emissions are equal to the amount of GHG that are removed. Washington’s emission reduction target is 95% by 2050. California is shooting for 85% by 2045 while New York’s target is 85% by 2050. In addition to the target levels and dates there are differences in what GHG emissions are included, how the mass quantities are calculated, and which sectors of the economy must comply. Nonetheless, I am sure a case can be made that Washington is the most aspirational.

A key component of the strategy of all three states is an emissions market program variation called cap-and-invest. According to the New York State Energy Research & Development Authority (NYSERDA) the permits to emit a ton of pollution (the allowance) are distributed freely in a cap and trade program but in a cap-and-invest program the allowances are sold at auction and the proceeds are invested to enable the reductions required. A more cynical description of the difference would say that cap and trade programs are market-based systems that encourage the free market to find the least cost approach to meet the limits while cap-and-invest programs are disguised carbon taxes.

Cap-and-invest Analytics

My primary interest at the moment is the New York State cap-and-invest program initiative. As part of the stakeholder outreach process, on June 20, 2023 a webinar (presentation slide deck and session recording) on the program’s analysis inputs and methods that will “assess potential market outcomes and impact from the proposed New York Cap-and-Invest (NYCI) program”. What caught my attention was a comment that the McKinsey Vivid Economics team would model the cap-and-invest auction and that they had done similar analytic projects for the State of Washington (Video at 13:42).

According to a Ecology web site the Vivid Economics report shows “new climate change initiatives deliver significant benefits at minimal costs.” I have never been impressed with most economic analyses of emissions trading program. John von Neumann famously said “With four parameters I can fit an elephant, and with five I can make him wiggle his trunk.” Many readers of this blog are skeptical about the value of global climate models because so many parameters are needed to simulate different physical processes in the atmosphere but at least there are physical relationships involved. Analytical models of cap-and-invest programs parameterize just about everything including human behavior. I have no confidence in their results. During the webinar I asked whether the Vivid Economics model had been verified. Not surprisingly there was no answer.

The Ecology web site report specifically addressed gasoline price projections based on economic modeling:

Economic report shows little impact on gas prices

Washington’s new Clean Fuel Standard will mean less than a 1-cent per gallon difference in the price consumers pay at the gas pump in 2023, according to estimates in a third-party economic analysis. Prices could rise up to 2-cents in 2024, and 4-cents in 2025, the report shows.

Ecology commissioned Berkeley Research Group to evaluate the Clean Fuel Standard’s impact on the retail cost of gas and diesel fuels, and the electricity for electric vehicles. Berkeley is an independent, globally-recognized consultant with a long track record of providing high-quality reports across a wide range of markets and industries.

Research shows regulations like the Clean Fuel Standard play a minor role in gas prices compared to the shifts in the U.S. economy and disruptions to crude oil supply and demand caused by global events, such as the pandemic and Russia’s invasion of Ukraine.

Legislators passed the Clean Fuel Standard in 2021. It will take effect in 2023. It requires fuel suppliers to gradually reduce the “carbon intensity” of transportation fuels 20% by 2038, enough to cut Washington’s statewide greenhouse gas emissions by 4.3 million metric tons per year. Transportation is the largest source of greenhouse gas emissions in Washington, accounting for 45% of total emissions.

The analysis shows price impacts vary over the next 12 years, and then drop to nearly zero as the number of electric cars increase and there’s a shift to cleaner energy.

Read the report on theClean Fuel Standardwebpage.

What actually happened? “The average cost of regular gasoline in Washington state hasjumped by 32 cents over the past month to $4.93 a gallon, according to AAA” according to an article

California is no longer America’s most expensive state for gas. Another article says that some experts connected the dots to the new legislation.

Clearly the reasons for gasoline price volatility are always complicated. Another article explains:

What is causing the spike is a matter of intense debate. Some point to the state’s new “cap and invest” emissions program, which was implemented in January. The program sets a limit — or cap — on overall carbon emissions in the state and requires businesses (including fuel suppliers) to obtain allowances equal to their covered greenhouse gas emissions. These allowances can be obtained through quarterly auctions hosted by theWashington State Department of Ecology. They can also be bought and sold on a secondary market, similar to a stock or bond.

According to Todd Myers with the Washington Policy Center, this program means drivers will pay more at the pump. “The way fuel suppliers in California and Washington have done it is that they have simply, rather than try to speculate what the future prices will be, incorporated the cost of the allowances immediately into gas prices,” Myers told KIRO Newsradio. “So, what you see is, the gas price almost immediately reflects what those prices are.”

But Luke Martland, Climate Commitment Act Implementation Manager with the state Department of Ecology, claimed it’s not that simple. “What determines what we pay at the pump in Washington is supply and demand: The war in Ukraine, what Saudi Arabia may do, how much profit oil companies take from the sales. It’s a whole bunch of factors — and cap and invest might be one of those factors. But to say there’s a direct connection is simply not accurate.”

Patrick DeHaan, Head of Petroleum Analysis forGasBuddy, said the link between the cap-and-trade program and gas price increases is clear.

In my opinion, the key point is that the cost of Washington gasoline has risen more relative to the price increases elsewhere so that now Washington has the highest prices in the nation. The first two auctions for the Washington cap-and-invest program sold 14,770,222 allowances and raised $780,829,117 averaging $52.87 per allowance. According to the US Energy Information Administration 17.86 lbs of CO2 are emitted per gallon of finished motor gasoline which means that 112 gallons burned equals one ton. That works out to $0.47 a gallon needed to cover the cost of allowances necessary to purchase the allowances and that is a unique Washington cost adder. I agree with DeHaan – the link is clear.

Ramifications

There is a clear link between the pass-through cost that gasoline suppliers must pay and the fact that Washington State gasoline prices have increased more than other states. One of the reasons for my obsession following similar policies in New York is that observed significant cost increases with little real benefits should engender a political response. If it can be shown that there are real and significant costs as opposed to the “no real impact” claims made by net-zero proponents the politicians who supported these policies should be held accountable. The question is whether the residents of Washington have figured out that their gasoline prices are so high because of the politicians who promulgated this policy.

I would appreciate any feedback from Washington residents about the cost impacts of this cap-and-invest program policy.

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Roger Caiazza blogs on New York energy and environmental issues at Pragmatic Environmentalist of New York. He blogs about the RGGI program because he has been involved with it since its inception and nobody else apparently wants to review it. This represents his opinion and not the opinion of any of his previous employers or any other company with which he has been associated.

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Do Washington State Residents Know Why Their Gasoline Prices Are So High Now? (2024)

FAQs

Do Washington State Residents Know Why Their Gasoline Prices Are So High Now? ›

Washington state has the highest gas prices in the nation because of the governor's cap-and-trade program that took effect in January. Governor Inslee's new climate mandate, which is the most expensive of its kind in the nation, has forced fuel prices to rise by 50 cents per gallon in our state.

Why are gas prices so high right now in Washington state? ›

Along with escalating crude oil costs, pumps are facing pressure from seasonal factors — refinery maintenance, the switch to summer gasoline and rising demand, according to GasBuddy, which tracks gas prices.

Why is gas so expensive in Washington state in 2024? ›

de Haan also stated, alongside an annual increase in road travel this time of year, refineries use a more expensive, less-polluting blend of fuel in the summer to account for changing weather conditions and mitigate environmental impacts. Gas prices have risen nearly 50 cents between Jan.

Why does Washington have the highest gas prices in the country? ›

The Washington program is designed to force rapid cuts to carbon intensity in a way that requires consumers to pay higher gasoline prices.” The cap-and-invest program is designed to decrease carbon emissions in the state to meet 2035 and 2050 decarbonization goals.

Why are gas prices so much higher in the West? ›

Why are west coast gasoline prices higher? The two main reasons are transportation and taxes. Part of the cost of gasoline is what it costs to take refined product and transport it to the end user. Below is a map of the main refineries and pipeline in North America.

What is the cause of current high gas prices? ›

Why are gas prices rising? Underlying the higher costs of gas are routine factors including refinery maintenance, the switch to summer gasoline and rising demand. Domestic supply is also impacted as refineries take advantage of milder weather conditions to do necessary maintenance.

Which state has the highest gas tax? ›

Why it matters: California has the highest state excise tax on gasoline in the country, and the highest price of gas. Zoom in: The average cost of regular gas is $4.79 per gallon in California, and $4.83 in San Diego County, as of July 3, according to AAA. That's compared to $3.51 nationally.

Why is WA state so expensive? ›

Factors like the combined sales tax rate, one of the highest in the nation, along with steep home prices and the cost at the pump, conspire to make Washington's cost a topic of much discussion and concern.

How much will a gallon of gas cost in 2025? ›

U.S. gasoline prices are expected to average around $3.40 a gallon in 2024 and $3.20 in 2025, compared with around $3.50 in 2023, according to the EIA's Short Term Energy Outlook report.

How much is the Washington gas tax? ›

Virginia gas tax is $0.262 per gallon, which supports the state's efforts to integrate transportation technologies for more efficient traffic management. Washington gas tax is $0.494 per gallon, with proceeds dedicated to earthquake retrofitting projects for bridges and infrastructure in this seismically active state.

Is gas cheaper in Oregon or Washington? ›

The price of gas in Washington State is currently the highest in the nation averaging $4.99 per gallon as of June 28, 2023. This is $1.33 higher than the national average of $3.56. It is even 34 cents higher than Oregon, whose gasoline price usually matches closely with Washington's, at $4.65 per gallon.

Why is gas more expensive in the Pacific Northwest? ›

Because of how mountainous the Pacific Northwest is, we only have supply lines that run north to south unlike states east of the Rockies, which have supply lines running every direction.” McAleenan explains why Washington's gas overcame California as the state with the highest fuel costs.

What state in the US has the most expensive gas? ›

Data as of May 24, 2024. Western and Pacific states face the most costly gas in the nation, as the five states with the highest prices are California, Hawaii ($4.79), Washington ($4.57), Oregon ($4.33) and Nevada ($4.32).

Who controls gas prices in the USA? ›

Petroleum prices are determined by market forces of supply and demand, not individual companies, and the price of crude oil is the primary determinant of the price we pay at the pump.

What state has the lowest gas prices? ›

September 2023 Gasoline Price Updates

Mississippi has the cheapest gasoline prices in the U.S., where the average cost is $3.29 per gallon. It also has the least expensive diesel prices out of the Top 10 states. Louisiana has the second-cheapest gas, with the average cost hitting $3.36 per gallon.

Why is gas so expensive in Western states? ›

Several factors go into what drivers pay for gas, including refining costs, taxes, distribution and marketing, and crude oil prices, according to the U.S. Energy Information Administration. High taxes are partly to blame in California. The state has the highest gasoline taxes in the nation, according to EIA.

How much is gas in Washington state right now? ›

Washington average gas prices
RegularPremium
Current Avg.$4.211$4.670
Yesterday Avg.$4.217$4.689
Week Ago Avg.$4.229$4.689
Month Ago Avg.$4.263$4.748
1 more row

Is natural gas being phased out in Washington state? ›

There is no ban on natural gas,” reads the utility's statement. “PSE has an obligation to serve any customer who wants natural gas.” House Bill 1589, the law targeted by the ballot measure, did not change that so those provisions in I-2066 would not affect PSE or its customers, according to the statement.

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