For far too long, Californians have been paying more at the pump than their fellow Americans. The surge in gasoline prices in the Golden State has raised eyebrows and left many wondering why filling their tanks now means emptying their wallets. The answer, quite simply, is supply and demand influenced by a destructive web of government policies. California’s high gas prices didn’t happen by accident. Sacramento’s policies play a pivotal role in this crisis.
In response to the public fuming over these high prices, the Governor announced the state will transition early to winter-blend gasoline, which is somewhat cheaper to produce, but still expensive. Like the arsonist who rushes to put out the fire he started, the Governor is trying to tamp down the flames of an angry constituency.
At its core, this issue can mostly be reduced to one economic reality: supply and demand. California’s stringent environmental regulations and increasing taxes have dwindled the state’s gasoline supply. This supply crunch is worsened by California’s impractical ban on the sale of new gasoline-powered cars by 2035. Oil refineries now face the challenge of planning for a future with fewer gas-powered cars while still providing affordable fuel to the millions who do not drive an electric vehicle, all while adhering to stringent regulations.
Ten years ago, the price of gas in California was about 30 cents per gallon higher than the national average. Today, it has ballooned to more than $2 per gallon higher, with reports of a staggering $7 per gallon in some areas.
In 2013, California lawmakers created a cap-and-trade program mandating that businesses purchase special permits if their carbon dioxide emissions exceeded certain levels. These permits alone raise the cost of gasoline by approximately 24 cents per gallon. Yet environmentalists feel it doesn’t go far enough. Jill Mangaliman, executive director of Got Green, a Seattle-based environmental justice group said, “Credits and offsets are not real reductions. They’re a way for polluters to buy out of their responsibility.” The goal of this cap and trade program isn’t to provide relief at the pump; the goal is to eliminate the pump altogether.
The California Air Resources Board (CARB) imposed regulations that limit the “carbon intensity” of fuels, a fancy way of describing the total emissions produced throughout the entire gasoline production and consumption process. Doing so adds around 22 cents per gallon to the wholesale gasoline cost.
Then, state lawmakers took it a step further by raising the excise tax on gasoline and tying it to inflation. Consequently, Californians pay 73 cents per gallon in state taxes. For comparison, our friends in other states pay about 39 cents per gallon. The taxes were supposed to fund road maintenance and repairs. To say the results have been underwhelming would be undeservedly kind. California’s roads rank among the worst in the Nation. Some of our roads are in such bad shape it feels like riding across the prairie in a covered wagon.
Increasing regulatory and tax burdens have driven several refineries out of California. Forty years ago, the state’s population stood at 24 million, and we had 43 operating refineries producing more than 2.5 million barrels of crude oil daily. Today, with a population of roughly 40 million, only 15 refineries remain, refining less than 1.75 million barrels per day. The consequences of these policies surprise only those who created them. The rest of us are left saying “I told you so.”
Of course, all of this is a dream come true to progressive lawmakers and regulators, intent on a full-blown ban on all fossil fuels. But it comes with a hefty price tag for low- and middle-income households who cannot afford higher prices.
Some conservatives in the state Senate and state Assembly have offered meaningful solutions: suspend the gas tax for one year, transition to winter-blend when oil prices spike, and eliminate the annual gas tax increase. And they rightly point out that California has the ability to produce clean oil right here at home, instead of importing it from oppressive nations. Temporarily suspending the gas tax serves as a short-term solution that can offer immediate relief, while we await a demonstration of readiness of progressive lawmakers to support increased in-state fuel production.
The disconnect between the majority party’s intentions and their costly outcomes could not be more clear. Governor Newsom recently boasted, “we brought big oil to their knees.” The reality is the only people brought to their knees are Californians filling up their gas tanks and begging for relief.
Melissa Melendez previously served as a California state senator and assemblymember. She is now president of the Golden State Policy Council.
