California’s Real Gas Tax May Be From Industry Profiteering

A bipartisan super-majority of California legislators took a courageous step this year to pass SB 1 (Beall), which raises the gas tax and vehicle license fees to help pay for backlogged repairs to our crumbling transportation infrastructure. Opponents are now mobilizing for a recall campaign against state senator Josh Newman of Orange County over the vote and to repeal the legislation by voter initiative.

But UC Berkeley energy economist Severin Borenstein makes the case that the gas tax increase may pale in comparison to possible price gouging by the oil industry:

It’s been 32 months now, and Californians continue to pay at least 20 cents per gallon more than our higher taxes, greenhouse gas fees (cap and trade and the low-carbon fuel standard), and production costs could explain. Throughout that time, I was a member of the California Energy Commission’s Petroleum Market Advisory Committee, a panel of independent energy market experts, and I chaired the committee starting in August 2015.

The PMAC issued its final report last month. It highlighted the unexplained price premium … that has hit Californians since mid-February 2015, amounting to $12 billion — or $1,200 for a typical family of four — in excess payments over the last two and a half years. Those extra payments continue today at a rate of about $3 billion per year, nearly twice the cost of Wednesday’s gas tax increase.

And unlike the extra tax revenue, this money is not going to fix any roads or bridges.

When Borenstein’s state-organized committee tried to make recommendations to investigate the surcharge, they got nowhere with the legislature:

The PMAC discussed both profiteering and infrastructure constraints on production and imports. But the final report concluded that the committee had been given neither the authority, nor the resources, to fully investigate and determine the cause of the mystery surcharge. The committee had no budget allocation, was assigned less than one full-time staff person, and had no power to compel cooperation from industry.

The committee urged the State to commit serious time and resources to unpack the reasons for the new normal of higher payments to gasoline sellers. So far, there is no sign of an appetite in Sacramento for such an investigation, even as we re-argue the case for and against increasing gas taxes to maintain roads and bridges.

So perhaps the real scandal here isn’t the legislature’s efforts to address our crumbling roads, bridges and transit systems — but rather it’s unwillingness to find out why the oil industry is charging California drivers so much for gasoline.

And in the meantime, California drivers (at least those who aren’t driving electric) are paying the price for this inaction.