Taxes, overload of “mystery” intensify the pain of Californians at the pump

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Taxes, overload of “mystery” intensify the pain of Californians at the pump

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California has the most expensive gas in the nation, hitting a statewide average price of $ 5.44 per gallon in early March, though the national average set a record $ 4,173.

Experts say the higher prices are due to a unique combination of emissions regulations, higher gas taxes and the Golden State’s status as a “fuel island”.

The United States has been grappling with record inflation and rising oil and gas prices in recent months, despite a rapid economic recovery. President BidenIrish Premier Joe Biden tests positive for COVID-19 during visit to DC CNN anchor interrupts conversation with Ukrainian father whose family was killed Graham introduces resolution urging Biden to help send jets to Ukraine MORE earlier this month he warned that the issue of high fuel costs would be exacerbated after the US banned Russian oil imports during the invasion of Ukraine.

Oil prices have fallen recently, an event that suggests that some relief will come for consumers at the pump in the coming weeks. But prices continued to rise particularly in Southern California.

The price of gas in Los Angeles County rose from $ 5,876 per gallon to $ 5,890 per gallon between Wednesday and Thursday, according to AAA data, marking the 23rd consecutive day of cost increases at the county level.

The trend continued across California as well, rising statewide from an average of $ 5,694 a week ago to $ 5,785 on Thursday.

Numerous factors contribute to particularly acute pump pain in the state, according to experts in economics and energy policy.

“First, taxes are generally higher in California, so the gas tax itself is higher,” Sanjay Varshney, a finance professor at California State University, Sacramento, told The Hill. “Number two, California’s environmental and emissions laws are tougher, so mix is ​​needed [for] gasoline tends to be more expensive ”.

Another key factor is that the state is a fuel island, or a place that receives no fuel through interstate pipelines, according to Kevin Slagle, vice president of strategic communications at the Western States Petroleum Association. State fuel supplies are made in the state or shipped by ship or truck, more expensive methods that are passed on to consumers.

State production covers about 30 percent of the state’s fuel needs, Slagle said.

“The other 70 percent or so is imported from all over the world, some from Alaska, but actually mostly from the Middle East, Ecuador, such countries,” he said. “So we have a situation where our… supply is limited by what we can produce in the state [and] we have had a slight drop in production over the past five or six years. ”

Slagle added that the state also currently has a significant backlog of manufacturing permits, leading to what he said was the “worst case” scenario in the state’s regulatory environment.

“We are simply not issued permits,” he said, “so one solution that we can see is … we take the permits that are offered to us, we take them to the field, we produce, so that in a few months, we have started increasing production. “.

“Why wait for another crisis to address when you have a readily available production solution?” He added.

There is another confounding factor, according to Severin Borenstein, faculty director of the Haas Energy Institute at the University of California at Berkeley: “The mysterious gasoline overload, which is the additional amount that appeared in 2015 and not. it never disappeared. ”

That overload, Borenstein said, appeared shortly after the 2015 explosion of an ExxonMobil refinery in Torrance, which caused prices in the state to rise relative to the rest of the nation, and which remained after the refinery went online.

“The state conducted an unconvinced investigation and didn’t really understand why it happened,” he said. Borenstein said that according to his ongoing calculation of the cost of overcharging, it averaged about 30 cents a gallon in 2021, or about $ 4 billion a year.

On a cent-per-cent breakdown of gasoline prices, the surcharge represents about 30 cents and 10 cents for the cleanest gasoline blend, according to Borenstein. Superior state tax account for about 75 cents.

“We also have a cap and trade program, which is adding about three cents these days. And we also have a low-carbon fuel standard that’s adding about 14 cents these days, ”he added.

Meanwhile, experts have said that possible political solutions to these problems are a daunting prospect. While several states have recently suspended their gas taxes or proposed to do so, there is little political will for such a move in California, according to Varshney, who noted a bill in the California Assembly to do the same. was rejected this week.

On Thursday morning, lawmakers proposed a different form of relief, introducing a bill to provide $ 400 tax rebates to cover costs. Congresswoman Cottie Petrie-Norris (D) called the proposal a preferable alternative to the suspension of the gas tax, saying the solution “offers no guarantee that oil companies will pass the savings on to customers”.

As for the overload, Borenstein, who chaired the state oil market advisory board from 2015 to its dissolution in 2017, said a deeper investigation could go all the way.

The committee’s investigation “never had the resources to conduct an investigation” and did not have the power to compel you to testify, he said. “So we were blocked by the oil companies and we had half a person in terms of staff, so we never made much progress and in 2017 we voted to dissolve the committee because we weren’t making any progress.”

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