Washington state's average gas price has climbed above $5 per gallon, making it one of only three states with prices that high, according to a new briefing from the Washington Policy Center. The report examines three claims made by Washington politicians and state agencies about what's driving the state's gas prices. It concludes that the war in Iran and Washington's climate law are both pushing prices up, while rejecting the Department of Ecology's assertion that there's no clear link between carbon pricing and gas costs.
The war in Iran has increased the price of a barrel of oil from about $60 to over $80, directly impacting pump prices. California's Department of Energy estimated crude oil accounted for $2.33 per gallon of gas in March, jumping 25 cents per gallon to $2.58 by May. Nationally, gas prices jumped from about $3 per gallon in early March to about $4 today, according to GasBuddy data cited in the report. But that doesn't explain why Washington's prices are so much higher than neighboring states. Two state-level factors are responsible: Washington's gas tax is 56.5 cents per gallon, third highest in the nation and 16.5 cents more than Oregon. More significantly, the state's Climate Commitment Act currently adds about 52 cents per gallon, based on CO2 allowance prices of $64.56 per metric ton.
The report disputes the Department of Ecology's claim that there's no "clear relationship between the price of carbon and the price of gas," calling it false and contradicted by multiple sources. A study commissioned by the Department of Ecology itself found a "shock" to Washington's gas prices when the Climate Commitment Act took effect in 2023, with prices going from equal to Oregon's in December 2022 to about 44 cents per gallon higher in 2023. The briefing cites Severin Borenstein of UC Berkeley, who helped California develop their carbon cap-and-trade system, telling The Seattle Times that "it is beyond controversy that Washington's carbon-pricing program contributed to the jump in prices." Patrick deHaan of GasBuddy similarly said "the link between the cap-and-trade program and gas price increases is clear."
The report traces the mechanism behind the price increase through California's own carbon market data. California's Legislative Analyst's Office estimated an allowance price of $29.27 per metric ton of CO2 adds 23 cents per gallon. Washington's current allowance price is more than double that at $64.56 per metric ton, which calculates to 51 cents per gallon using the same methodology. The report also notes that former Governor Inslee's own policy advisor admitted in 2014 that a CO2 tax would increase gas prices by 44 cents per gallon with a CO2 price lower than Washington currently has. The briefing accuses the Department of Ecology of misleading the public, pointing out that in 2023 the agency's web page claimed the Climate Commitment Act would add "an additional 5 cents per gallon in 2023," then quietly removed that claim when Washington's gas prices jumped to the highest in the nation and 45 cents above Oregon's.
The briefing recommends two policy options to lower gas prices. First, suspend the Climate Commitment Act while prices are high, which would reduce current gas prices by about 52 cents per gallon, though legislators would need to adjust the state's compliance schedule. Second, cap the price of Climate Commitment Act permits at California's current price of $28.81 per metric ton, which equates to 23 cents per gallon—a reduction of 28 cents per gallon from current prices. Since Washington hopes to join California's carbon market next year, this would align the two states' prices and provide immediate relief at the pump.