Why California Legislators Should Be Investigating High Gas Prices

Are oil companies gouging California drivers? And if so, why aren’t legislators looking into it? I blogged this past fall about UC Berkeley energy economist Severin Borenstein making the case for possible price gouging and how the California Legislature is not heeding his commission’s advice to investigate.

Borenstein is now back at it, in the face of continued legislative intransigence:

The extra payments since February 2015 have cost California drivers about $15 billion. And if the differential continues at its current level, which shows no sign of abating, it will cost Californians about $3 billion in 2018. Is that small potatoes?

What should California do about the mystery surcharge? First, set up a commission with real resources to investigate the cause. Give them the funding necessary to hire (or borrow from other parts of state government) the very best experts in the oil and gasoline supply chain, and in market economics and competition policy. Then give them the authority to examine all the confidential data from companies that city, county and state offices collect. And compel the executives at those companies to meet with this commission – not the trade association representatives or outside consultants they sent to PMAC meetings — and answer questions, behind closed doors if necessary to protect confidential or competitively-sensitive information.

What’s particularly peculiar about the legislative inaction on this topic is that legislators are about to face a political hammer for passing last year’s SB 1 (Beall), which raised the gas tax and vehicle license fees to help pay for backlogged repairs to our crumbling transportation infrastructure. In response, opponents are mobilizing a recall campaign against state senator Josh Newman of Orange County over the vote and also to repeal the legislation by voter initiative (the initiative would also prevent any new gas tax increases from passing without a vote of the people).

So why won’t legislators seize on this issue to 1) show that they care about high gas prices and 2) see if there truly is industry malfeasance taking place? If the latter, that would give them a pretty big political win to help defend the SB 1 measure. After all, wouldn’t voters be less likely to complain about a few extra cents in gas taxes for road repair when it’s the industry that is gouging them by much more? And in turn, it’s the legislature that has helped save drivers gas money through an investigation?

At the very least, it seems like both smart public policy and politics to heed Borenstein’s advice.