Energy expert: WA gas prices lagging national drops due to high taxes, other factors

by Brett Davis, The Center Square, Jan 5, 2026

(The Center Square) – While motorists in much of the rest of the nation are seeing gas prices below $3 a gallon, drivers in Washington state continue to deal with fuel costs averaging closer to $4 a gallon, thanks to specific state-level policies and other factors that keep prices elevated.

According to AAA, on Monday, the national average price for a gallon of regular unleaded gasoline in the U.S. is just over $2.81 a gallon. The average price at the pump in Washington is just under $3.84.

Only two states currently have higher gasoline prices than Washington: Hawaii, at nearly $4.41, and California, at almost $4.27, according to AAA.

The Center Square spoke with Patrick De Haan, head of petroleum analysis at GasBuddy, an app and website that helps drivers find the cheapest gasoline prices in their area using crowd-sourced data.

“It’s absolutely because of Washington state’s cap-and-trade program - now the carbon tax essentially,” he said, explaining one reason for the Evergreen State’s high gasoline prices, during a Monday morning phone interview. “Washington and California have some of the highest prices because of this new system that essentially requires refineries to purchase credits to operate their refineries to produce gasoline, diesel and jet fuel. It’s for that reason that Washington state remains one of the most expensive states for gasoline prices in the country.

Under the 2021 Climate Commitment Act, Washington aims to reduce greenhouse gas emissions by setting a cap on the total amount of pollution allowed in the state and requiring covered businesses to obtain allowances equal to their emissions. These allowances can be acquired through quarterly auctions run by the Washington State Department of Ecology. Auctions began in early 2023.

Ecology is gradually reducing the number of available allowances each year, resulting in a shrinking supply and higher prices.

The cap-and-trade program has raised more than $4.3 billion to date. The funds are allocated to projects that ostensibly reduce greenhouse gas emissions and promote clean energy initiatives.

California has a similar program that has raised some $33 billion since its inception in 2012.

It’s not all bad news for Washington drivers, at least in the short term, according to De Haan.

“The average price, though, is down about 36 cents a gallon in the last month,” he said, before adding, “Washington is still averaging $3.75 a gallon; that’s a full dollar higher than the national average.”

Per AAA, gasoline prices in Washington averaged just over $4.12 a month ago.

GasBuddy relies heavily on user-reported data, while AAA often uses a combination of user reports and professional surveys, with slight variations in timing creating discrepancies.

California usually holds the top spot for the nation’s highest fuel prices, but occasionally trades places with Hawaii and even Washington, albeit rarely.

“California has seen more imports of supplies from places as far away as Asia,” De Haan explained. “Hawaii – also extremely limited competition in that market – with just one refinery in the state, so prices generally, you know, between Hawaii and California, perennially one of those two [is] amongst the highest.”

He went on to say, “But much of the West Coast U.S. is still subject to limitations on refining capacity. Some of that is due to refinery shutdowns that have happened in California. Washington state also saw earlier issues with the Olympic pipeline, and that wasn’t so much having an impact on price, but now the cap-and-invest program in Washington state is likely going to prevent prices from falling more, similar to what is being seen nationally.”

The Phillips 66 Los Angeles refinery ceased traditional fuel production in late 2024, and the Valero Benicia refinery is set to close by April.

In November, Washington's Olympic Pipeline experienced a leak near Everett, causing supply disruptions for gasoline and jet fuel, leading to concerns and actual spikes in gas prices ahead of the busy Thanksgiving travel period.

De Haan thinks the future will bring higher gas prices in Washington and other western states.

“I think in the next maybe four weeks or so, give or take a couple of weeks, we could be ultimately getting closer to seeing our prices bottom out,” he said. “California is the first state in the nation to make the switchover back to more expensive blends of summer gasoline; that happens in late January. And so that is also going to mean that there is limited output for gasoline that is for other markets, including Oregon, Washington, Nevada and Arizona. So, that could lead to fragmentation and pushing up prices.”

De Haan continued: “Ultimately, we also tend to see gas prices going up in the spring as refineries start their late winter maintenance ahead of the start of the summer driving season. In addition, gasoline demand will start to go up as we get into warmer weather and things like spring break travel. So, typically, gas prices bottom out in late winter or early February before beginning their seasonal rise. I do expect that sometime this spring, the statewide average in Washington will again surpass the $4 a gallon mark.”

He ended on a somewhat positive note.

“Having said that, we still expect that 2026 gas prices in Washington state will see a slight improvement from what we saw in 2025,” De Haan said.