California Politicians Hiked Gas Tax, Now Demand Investigation Into State’s $4 Per Gallon Gas Prices

As lieutenant governor, Gavin Newsom supported a 2017 bill increasing the state’s gas taxes. When running for governor in 2018, he opposed a ballot initiative that would have repealed that same increase. It’s 2019, and Newson, now the state’s governor, is demanding an investigation into why the state’s gas prices are so high.

On Tuesday, the governor sent a letter to the California Energy Commission (CEC) asking that the state agency investigate the Golden State’s roughly $4.03 per gallon gas prices, currently the highest in the country (and well above the national average of $2.86 per gallon).

“Independent analysis suggests that an unaccounted-for price differential exists in California’s gas prices and that this price differential may stem in part from inappropriate industry practices,” wrote Newsom in his letter to the CEC. “These are all important reasons for the Commission to help shed light on what’s going on in our gasoline market.”

Newsom is not alone in wanting answers to this difficult head-scratcher.

In January, 19 state legislators—17 of whom had voted in favor of that 2017 gas tax increase, while the other two had only entered office in 2018—sent a letter to State Attorney General Xavier Becerra demanding that the state’s Department of Justice (DOJ) investigate the “unexplained gasoline surcharge” that was estimated to cost Californian families $1,700 a year.

California currently imposes the second-highest gas taxes in the country. A state excise tax currently adds $.417 per gallon, a rate that will increase to $.473 come July. On top of that, the state imposes a 2.25 percent gasoline sales tax.

In addition, California has adopted a low-carbon fuel standard and a cap-and-trade scheme for carbon emissions which together increase the state’s gas prices by $.24 per gallon above the national average, according to a 2017 state government report.

That same report maintained that, even after all these state-imposed costs were tallied up, California’s gas prices remained above the national average, a finding that both those 19 state legislators and Newsom are using to justify their demands for an investigation.

Newsom, as mentioned, alleged there may be “inappropriate industry practices” at play.  State lawmakers, in their January letter, suggested the state’s retail gasoline market might lack “robust competition” leading motorists to pay more at the pump.

However, a lot of the higher, non-government-imposed prices Californians are paying currently could plausibly be chalked up to normal supply and demand.

Local media reports point to the twin effects of increasing demand and springtime maintenance at the state’s refineries as contributing to the price hikes.

The late March shutdown of a Valero refinery in the Bay Area added to the price hikes.  Something similar happened in 2015, when an explosion at the Torrance refinery in Los Angeles County caused the facility, then responsible for refining 10 percent of the state’s gas, to close for over a year.

Prior to that 2015 explosion, California’s “gasoline price premium tracked closely with our higher taxes and production costs,” wrote Severin Borenstein, a professor at University of California, Berkeley’s Haas School of Business in a blog post.

After the Torrance explosion, prices spiked, and then slowly began coming down over the next year, although they to this day remain higher than they were prior to that incident.

Industry representatives maintain that any difference in the state’s gas prices can be explained by normal market forces, and of course all those taxes and regulations.

“The petroleum industry on the West Coast has been subject to dozens of independent investigations by government agencies, all of which concluded the dynamics of supply and demand are responsible for movements in the price of gasoline and diesel fuel,” said Kevin Slagle, a spokesperson for the Western States Petroleum Association (WSPA), in a statement, adding that “state programs, such as cap-and-trade and the Low Carbon Fuel Standard, impact fluctuations in energy markets.”

It should be pointed out too that high levels of taxation and regulation and a lack of competition in the state’s fuel sector are not mutually exclusive explanations.  Government fees and red tape often have the effect of squeezing out marginal producers and retailers, giving remaining firms greater ability to raise prices.

And regardless of any “mystery surcharge” on California gas, the fact remains that state government polices are a huge component of the final price everyone is paying at the pump.

Indeed, in the case of the state’s cap-and-trade scheme—where the state caps the amount of allowable carbon emissions, and then auctions off emission credits—the explicit purpose is to raise the cost of emitting carbon, and thus burning gasoline.

Absent these policies, the state’s gas prices would be lower.

Clearly, for many of California’s politicians, the benefits of state policies aimed at producing cleaner air quality, mitigating climate change, and generating more revenue for road maintenance and light rail expansions surpass the costs of higher gas prices.

If that’s the case, however, Newsom and others should make that case to voters directly and explicitly instead of trying to appease motorists’ anger by pointing their fingers at industry.

This article was originally published by Reason.com

Comments

  1. Just cruzed down the 99, California’s central North-South major highway.
    Not much, if any work going on on the roadbeds. They need it bad. It’s like driving on a washboard. Lot’s of bumps and thumps.
    I do see money being poured into the dead-end high-speed rail to no-where.
    I guess Newsom’s priorities are not California Citizen priorities.
    Working for himself, I see, just as most Progressive Democrats, in elected office, do. It’s all about the money, power, and face time on the news channels.
    Must be getting real close to time to move before the real estate values drop like a rock.

    • Get out while you can, if you can. It’s only going to get worse. My wife and I excaped 4 years ago to Idaho and so happy we did.

  2. Newsom is hoping on stupidity and nobody paying attention. I relay the mandatory expensive summer blend that cannot be imported, coupled with high taxes and refinery outages as to contributing cost. Two of the three are on Ca. government. Newsom hoping citizens are stupid is the same as Maxine Waters asking why student loans are high, trying to blame others when, in fact, government runs the student loans.

  3. I wonder if this is another trip down fantasy lane and the government being asked to investigate itself and then to report whether or not they think they are doing anything wrong again.
    The question should be where the hell is the money for road repairs that the people have been extorted out of all these years. It’s almost laughable when I see the city planting trees and shrubbery on freeway on-ramps that will block our ability to see how we should merge SAFELY when there is a supposed water conservation emergency as well as NO roads being repaired. Seems they have money for anything BUT road repairs and If past actions reflect future actions then 10 bucks a gallon tax on gas would NOT be enough for the corrupt criminal Communist politicians of Commifornia.
    the sword of—–

  4. I swear if these fellas’ aren’t sounding more like democrats every time they open their mouth.

  5. Who are they going to blame when the last part of the previously scheduled gas-tax increase kicks in next year – the Easter Bunny?
    So glad I left; and as things now stand, never to return.

  6. The money voted in for “road repair” has been allocated 90% to light rail, bus transit, bicycle paths, pedestrian safety, bulb-out curb changes, “beautification” of our streets and neighborhoods by taking away parking and planting trees and wide boulevards for pedestrians to walk. California wants everyone OUT of cars and if you think $4 a gallon is high, just wait until next year. Only question is how badly will we suffer taxes and deprivation of individual liberties because we love this unique climate in the Bay Area?

    • Boris Badenov says

      Carrie, please don’t get me going on the gigantic WASTE OF MONEY of those [email protected] bicycle lanes. But then it was a feel good project to support a few that actually can ride a bicycle 20 miles in the rain to work. Not that they ever do. They hop in their Teslas or Audi’s or BMW’s.

  7. Anthony G. says

    God help us, we are doomed. I listen to Steve Frank every Wednesday morning on KSFO here in Lousy San Francisco. If the idiots up in Sacramento do not know why the price of gas is so high, maybe they should listen to Steve Frank too. Wait till July 2019, another 5 cent jump. Then January 2020 another 70 cent jump. God help us. To think the people in this state voted to keep the tax. Look at the chappy roads here in the bay area, they look like they are being fixed. HWY 17 over the Santa Cruz mountains is like driving on the moon. If ever a HWY needed repaving it’s this one. Thank You.

  8. I am totally dumbfounded that Newsome and the rest of the liberals in Sacramento are looking for the reason gasoline in California is the highest in the nation? The answer to that is an easy one: it is all Donald Trump’s fault…!

    • James Pruitt says

      Hell what does Trump have to do with a state issue? He didn’t tell them to keep raising y’all’s taxes. He didn’t say go screw over all the hard working California’s. Stop blaming Trump and start blaming California’s state Government.

  9. I am ashamed of hat my home state has become. Democrats are taking it down the toilet and have made it a one party state. Few if any checks and balances which is what a multi-party system does. These idiots in Sacramento are concerned only for their welfare and the people be damned. I would not be surprised if they truly believed the crap they spew. They will continue to rape the middle class thru these taxes while spending little to fixing the infrastructure, but then rely on the feds to come to their rescue. The country has clearly stated NO to that little idea. California voters have to change this. California voters got it going by voting these idiots into office.

  10. How funny they want Becerra to investigate the high gas prices, this asswipe is as corrupt as they come…He changed the wording on prop 6 and burried it on the last page..Reading the wording you could not even tell it was prop 6…Becerra, Newson are to blame for the high gas prices…Vote this democrate garbage out of office…Demwits are nothing but trash

  11. California voters did not read the part about Sacramento spending gas tax dollars for whatever the hell they want to. Half of California voters pay no income tax, add that to the uninformed voters we are screwed. The fiddling in Sacramento continues while California burns.

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