California Governor Gavin Newsom has noticed something amiss in his home state and by gosh, he wants some answers. What is that’s put a bee under his bonnet? Gas prices in the Golden State are too high and people are grousing about it. People who vote. So the Governor is swooping into action, determined to solve this vexing mystery. (LA Times)
Gov. Gavin Newsom wants to know why California’s gasoline prices are higher than in the rest of the country, blaming potential “inappropriate industry practices” Tuesday rather than the state’s higher taxes and tougher environmental regulations.
Newsom asked the California Energy Commission for an analysis of the state’s gas prices by May 15. California drivers were paying an average of $4.03 a gallon Tuesday, or $1.18 more than the national average, according to AAA.
Higher taxes, along with a combination of tougher gas standards and environmental regulations, normally account for about 70 cents of that difference, said Gordon Schremp, a senior fuels specialist with the California Energy Commission. But the rest is a mystery.
So gasoline in California is averaging just over four dollars per gallon these days. That’s considerably higher than the national average of $2.88 (according to the AAA) and even further above the low price of $2.51, you’ll pay in Alabama this week. Do you suppose that the taxes might have something to do with it? After all, California has the second highest state gas tax in the country at 55.5 cents per gallon. (Second only to Pennsylvania.)
But that’s not the only factor. California also places demands on the industry in terms of blending and testing that make it more expensive to ship gasoline into the state and legally sell it. That’s why the total state-imposed fees add up to something closer to 70 cents per gallon.
And yet, taxes alone don’t tell the whole story. If they did, how would we explain Alaska? They have the lowest gas tax in the country at only 14.7 cents per gallon, but the sixth most expensive gasoline at $3.36. On the other end of the scale, you see states like Florida. They have the tenth highest gas tax in the country at 41.4 cents per gallon and yet they have one of the lowest average gasoline costs, coming in at $2.70.
How does that work? Well, it’s because there are more factors in determining how much a gallon of gas costs to produce and bring to market than just the cost of a barrel of oil that week. Different states set different quality and testing standards, as mentioned above. On top of that, thanks to the Renewable Fuel Standard, refineries have to either blend ethanol into your gas or pay for RIN credits. Those costs are added into the formula.
But you also have to ship the gasoline from the refinery where it’s made to the gas station where you fill up your tank. The further you are away from a refinery, the more it costs. Not coincidentally, the irony in Alaska’s situation is that their state is where a vast amount of oil and natural gas is extracted from the Earth, but virtually none of it is processed there. So they’re paying to ship that oil down to the lower 48 and then ship it back north in the form of gasoline.
The point is, none of this is a mystery that should be puzzling Gavin Newsom all that much. The vast majority of the extra cost for gasoline in his state comes from the taxes and fees they impose, along with more stringent regulations of the product. If he wants cheaper gas he needs to lower those costs. Otherwise, bite the bullet and pony up a bit more, Californians. You keep electing these taxaholics year after year and these are the results you get for it.