California's gas tax climbs to 63.4 cents July 1 as Trump orders a DOJ price probe
California's excise tax on gasoline rises to 63.4 cents a gallon on July 1, the highest state rate in the country. The increase is automatic, indexed to inflation, and it lands while pump prices are already a political flashpoint. President Trump, frustrated that retail gasoline has not fallen as fast as crude, ordered the Justice Department to look into pricing and possible gouging.
The price politics
The gap between crude and the pump drives the politics. Crude has slid this month, yet retail gasoline came down slower, and the AP and others noted the reasons are not simple, since refining margins and state taxes both sit between a barrel and the nozzle. A California lawsuit adds a sharper claim, alleging that AI pricing tools helped gas stations coordinate higher prices. Indiana, by contrast, topped the cheap list after Governor Braun's gas-tax suspension.
Crude and the SPR
The supply backdrop turned heavier. The EIA's Weekly Petroleum Status Report showed U.S. commercial crude inventories falling, with refineries running 17.1 million barrels a day for the week ending June 19. That same report put Strategic Petroleum Reserve crude at a four-decade low, a thin cushion if a supply shock hits this summer. Refining throughput that high signals strong product output, which helps explain softer wholesale gasoline.
Diesel and propane
Diesel fell below $5 a gallon, a real break for farmers heading into the second half of the growing season. Propane inventories kept building to about 90 million barrels even as exports stayed strong, a comfortable setup ahead of fall heating demand. On the freight side, one forecast warned budgets to prepare for $70 Brent, a reminder that the current calm could turn.
What to watch
The DOJ inquiry is the wild card. It is unlikely to move pump prices on its own, though it raises the political stakes around refining and retail margins this summer. Watch the July 1 California increase flow through to West Coast pump averages, and keep an eye on the SPR, because a four-decade low leaves little room if a hurricane or outage tightens supply.