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California’s governor and legislators often do things that defy real-world rationality and can only be explained, if not justified, in political terms. This month’s political drama over gas prices is an extreme example.
As any motorist knows, gas prices in California are much higher than in other states. Just driving to Nevada and Arizona to fill up on gas will likely cost you $1 a gallon less than in California. Even if that fuel probably comes from a refinery in California.
Much of the difference is explained by California’s unique blend of gasoline mandated to combat smog and by the nation’s highest direct and indirect taxes.
Severin Borenstein, an economist at the University of California at Berkeley who is considered the state’s leading expert on the issue, wrote in a 2023 paper that California’s direct and indirect taxes on fuel are close to $1 per gallon. He pointed out that the national average for such taxes is 70 cents higher than the national average. The unique fuel blend is an added plus. Borenstein is also calling for a deeper review of what he calls the “mysterious gas surcharge,” which averaged 65 cents two years ago.
Despite these high prices, gas remains a relatively small portion of the cost of living in California. Driving 240 miles a week in a 20 mile per gallon car can cost $12 more than in other states.
Nevertheless, gas prices attract very high levels of public attention as a symbol of anxiety about the cost of living in general, and are thus ripe for political exploitation.
Gov. Gavin Newsom has been gaslighting Californians about gasoline prices in recent years, ignoring the simple fact that taxes and other mandated fees are a major driver of rising prices, and saying that refiners are They claim that they are ripping off drivers.
He never presented evidence, nor did he insist that lawmakers provide evidence, before enacting the new law that he claims would prevent price gouging. The latest proposal, finalized on Monday, calls for refineries to stockpile more fuel to cushion the impact of maintenance outages.
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At best, having more gas in reserve might save you a few pennies on a gallon of gas, but as the California Energy Commission has acknowledged, it could also drive up prices. In a recent analysis, several commissioners wrote that Newsom’s proposal could “create artificial shortages in downstream markets” and “increase average prices.”
So is there more to Newsom’s request for Congress to convene a special session on gas prices than just election-year grandstanding?
There is a story behind it that is worth noting. The state vowed to completely wean itself from carbon-based energy and eventually close its nine remaining refineries, but maintained gasoline supplies during the transition period.
Last year, the California Air Resources Board released a report on interim steps to adopt a so-called “low-carbon fuel standard,” calling for “electricity, hydrogen, biofuels, etc. needed to replace fossil fuels and reduce fuel consumption.” “Providing economic incentives to produce cleaner fuels.” Transport sector emissions. ”
The report found that implementation could immediately increase gasoline prices by 47 cents per gallon, and then “on average, from 2031 to 2046, the proposed amendments could increase gasoline prices by $1.15 per gallon.” Diesel costs $1.50 per gallon and fossil jet fuel costs $1.21 per gallon.
The report generated a series of adverse media and political attention, and CARB suffered some setbacks. The government is currently refusing to release numbers on how the program will affect gas prices. Nevertheless, it is clear that the shift away from gas-powered travel will hit consumers hard.
Perhaps the performance law adopted on Monday is aimed at distracting attention from the larger impact of the transition, or perhaps it is an attempt to impose state restrictions on refineries to avoid sudden closures that could lead to shortages or severe price increases. This may be a sign that micromanagement will become even stronger.
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