US Domestic and Imported Oil Prices are dropping…
Domestic and imported crude oil prices dropped in May 2025; this trend is expected to continue through October 2025. The reduction in crude oil prices has been reflected in prices at the pump. In California, the minor state excise tax increase and new emissions regulations took effect on July 1; however, these measures have not been sufficient to reverse the overall downward trend in prices, which is attributed to broader market factors. California is still facing refinery closures through 2026, which will reduce supply and likely lead to increased prices.
Factors driving down US gas prices
1. Decline in Crude Oil Prices
The primary driver has been a sharp drop in crude oil prices, which fell to around $68/barrel for West Texas Intermediate and below $66/barrel for some futures in July 2025. Over the past three months, this marks a decline of roughly 15-20%[1][3].
Lower crude prices reduce refinery input costs, which are passed on to retail gasoline buyers.
2. Weak Seasonal Demand
Despite being summer, travel and fuel demand have been lower than expected, in part due to economic uncertainty and weather conditions. This weaker demand has kept inventory high, putting additional downward pressure on prices[4][6].
3. Increased Supply and Imports
The U.S. saw higher gasoline imports and strong domestic production. OPEC+ increased production quotas starting in August 2025, easing global supply constraints.
U.S. gasoline futures fell to their lowest since early July on higher inventories and soft demand[4].
4. Investor and Market Sentiment
Bearish sentiment among investors and commodity traders has further pressured spot and futures prices for both crude oil and gasoline[4].
Price per barrel for US Domestic and imported Crude Oil
Other Circumstances That Impact Gasoline Prices in California
California faces unique added pressures that keep its gas prices higher than the U.S. average, even as national prices drop:
Higher Taxes and Regulatory Costs:
California has the highest gasoline taxes in the country, including annual excise tax increases (like the July 2025 rate hike) and special fees for environmental programs (Cap-and-Trade, Low Carbon Fuel Standard)[7][9].
Stricter Environmental Regulations:
Special fuel formulations and blends are required to meet environmental standards, raising production and compliance costs.
California’s isolated fuel market, with limited pipelines and few connections to other states, makes the state more vulnerable to local disruptions and increases transportation costs[8][10].
Shrinking Refinery Capacity:
The state has fewer in-state refineries due to recent closures, further straining local supply and increasing reliance on imported fuel, which is more costly to transport[7].
State-Specific Seasonal Requirements:
Each year, California switches between winter and summer gasoline blends, which can impact production costs and create temporary supply issues if refineries experience outages or maintenance[8].
Monthly Fuel Prices for Northern California for the past 12 months
Result:
As of July 2025, California gas prices remain more than 40% above the national average ($4.64+/gallon vs. $3.16/gallon nationally)[7].
Broader U.S. market factors (especially the fall in crude oil) have led to lower prices in California in absolute terms, though the state’s unique cost structure prevents consumers from seeing the full benefit of national price declines[7][10].
Sources
[1] Crude Oil Prices: West Texas Intermediate (WTI) - Cushing, Oklahoma https://fred.stlouisfed.org/series/DCOILWTICO
[2] Crude Oil - Price - Chart - Historical Data - News - Trading Economics https://tradingeconomics.com/commodity/crude-oil
[3] Crude Oil WTI Futures Historical Prices - Investing.com https://www.investing.com/commodities/crude-oil-historical-data
[4] Gasoline - Price - Chart - Historical Data - News - Trading Economics https://tradingeconomics.com/commodity/gasoline
[5] US gasoline prices could fall below $3 a gallon soon - Audacy https://www.audacy.com/kcbsradio/news/national/us-gasoline-prices-could-fall-below-usd3-a-gallon-soon
[6] The Summer of Cheap Gas Continues - NerdWallet https://www.nerdwallet.com/article/finance/are-gas-prices-going-down
[7] U.S. and California Gasoline Prices…Why the Recent Decline? https://californiaglobe.com/fr/u-s-and-california-gasoline-prices-why-the-recent-decline/
[8] Fact Check: What's Behind California's High Gas Prices? https://centerforjobs.org/ca/special-reports/fact-check-whats-behind-californias-high-gas-prices
[9] Fact check: Claims swirling on California gas prices https://www.gov.ca.gov/2025/06/25/fact-check-claims-swirling-on-california-gas-prices/
[10] We still rely on gasoline. Why is California adding to the cost and the ... https://www.latimes.com/opinion/story/2025-07-06/california-gasoline-costs-refineries-pollution-imports
[11] Facts per Gallon https://factspergallon.com
[12] Gas prices are very low across the United States - inflation adjusted https://www.reddit.com/r/AskEconomics/comments/1ft0bg5/gas_prices_are_very_low_across_the_united_states/
[13] AAA Fuel Prices https://gasprices.aaa.com
[14] US Retail Gas Price - Real-Time & Historical Trends - YCharts https://ycharts.com/indicators/us_gas_price
[15] U.S. Regular All Formulations Retail Gasoline Prices (Dollars per ... https://www.eia.gov/dnav/pet/hist/leafhandler.ashx?n=pet&s=emm_epmr_pte_nus_dpg&f=m
[16] U.S. All Grades All Formulations Retail Gasoline Prices (Dollars per ... https://www.eia.gov/dnav/pet/hist/leafhandler.ashx?f=m&n=pet&s=emm_epm0_pte_nus_dpg
[17] Crude Oil Prices (1946-2025) - Macrotrends https://www.macrotrends.net/1369/crude-oil-price-history-chart
[18] Brent crude oil - Price - Chart - Historical Data - Trading Economics https://tradingeconomics.com/commodity/brent-crude-oil
[19] Gas Station Price Charts - Local & National Historical Average Trends https://www.gasbuddy.com/charts
[20] California gas facts - CA.gov https://www.ca.gov/gasfacts/