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Who’s to blame for high gas prices? California’s Democratic politicians should look in the mirror.

March 14, 2024

Gas prices at the pump are rising again. But should you blame Big Oil, as Gov. Gavin Newsom does? A new study finds the real culprit is California’s own government.

“Pain at the Pump: Blame Politicians, Not Producers, for High California Gasoline Prices” is by Robert J. Michaels, an economics professor at Cal State Fullerton, and Lawrence J. McQuillian, a senior fellow at the Independent Institute.

The study explains how crude oil, which is refined into gasoline, is a vast global market. For California, just 29% of crude comes from our own state, a percentage that’s declining. Another 15% comes from Alaska. And most, 56%, comes from countries such as Iraq, Ecuador and Saudi Arabia. The point is the state’s environmental laws, which discourage drilling for more oil, are irrelevant to the price at the pump. We just get the black gold elsewhere.

Indeed, when compared to the other 49 states, the price of crude oil here contributed just 2 cents more to the price, after refining, of gasoline at the pump.

So, why does the price of a gallon cost $1.20 more at the pump than the U.S. average? The main higher cost drivers for drivers: We pay 32 cents more for the higher California excise tax, 42 cents more for higher California refinery costs and 51 cents more for higher California environmental regulatory costs and local taxes.

It’s true California is what’s called a “fuel island” because of the special summer and winter blends of gas needed to fight smog. No other state uses those blends. The study notes we’re “cut off from adjustment mechanisms that are available in other regions of the country.” Price spikes last longer. But the authors also note the average disparity in prices with other states didn’t exist two decades ago when the “fuel island” also existed. We remember that in the late 1990s gas cost just 99 cents a gallon, similar to the rest of the country.

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Unfortunately, a year ago Newsom pushed the Legislature to pass Senate Bill SBX1-2, under the long bureaucratic name the California Gas Price Gouging and Transparency Law. Taking effect in June, it established yet another new bureaucracy, the Division of Petroleum Market Oversight. Promised the governor, “California is serious about holding Big Oil accountable.”

Michaels and McQuillian predict the new bureaucracy “will come up empty because oil and gasoline producers are price takers in a largely competitive market.” The real causes of California’ higher prices are the “policy choices by Gov. Newsom and other officials over the years.”

If Newsom and the Legislature really wanted to help Californians at the pump, they could start by repealing Senate Bill 1 from 2017, a 50-cent gas tax increase. Inflation pushed that up to 58 cents a gallon last July 1; another increase likely will hit July 1.

But that would mean taking responsibility themselves, instead of shifting blame to non-existent price fixing in a highly competitive market.

Orange County Register

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Who’s to blame for high gas prices? California’s Democratic politicians should look in the mirror.

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