This op-ed originally appeared in The Orange County Register and can be viewed here.
Gasoline prices around the country have dropped dramatically so far this year, as the price of oil has slumped. Gas prices in California, however, remain much higher than the national average.
At the February meeting of the State Board of Equalization, I voted with the majority to approve a 2.2-cent decrease in the gas tax as mandated by the fuel-tax swap. This adjustment follows a 6-cent decrease last year. However, these decreases have had little effect on the overall cost to fill up at the pump. Many consumers are rightfully asking “Why?”
There are a multitude of factors that result in California’s dubious distinction of having the most expensive gasoline in the nation. While a high tax rate certainly contributes to the final price, so to do multiple hidden costs that few motorists realize they are paying.
While any reduction is welcome news for California drivers, the truth is that overreaching regulatory policies effectively eliminate the tax savings, resulting in somewhat of a wash for consumers.
To illustrate, let’s examine the cost of taxes and regulation per gallon of gasoline, as evaluated by the California Energy Commission:
• State excise tax: 30 cents per gallon;
• State’s cap-and-trade carbon reduction program: 10.3 cents per gallon;
• 2016 low-carbon fuel standard: 4.3 cents per gallon.
• Total additional cost: 44.6 cents per gallon.
While the excise tax is transparent to the consumer as displayed at the pump, the cap-and-trade and low-carbon fuel fees – or taxes if you prefer – are imposed on industry and are then passed on to you, obscured by the overall cost per gallon of gasoline. These hidden costs are subject to increases, while remaining outside the public eye, for those who do not have the time or energy to keep track of the Sacramento shenanigans.
It is also worth noting that while the cap-and-trade cost did not go into effect until recently, the low-carbon fuel standard has effectively increased by more than 400 percent over the past year, from 0.8 cents per gallon to 4.3 cents. If and when gas prices stabilize to more historical levels, this should be easily recognizable for consumers who will once again be paying sky-high prices to fill up their vehicles. An increasing price due to stabilizing markets would also likely result in a mandated increased adjustment in the gas tax due to the aforementioned fuel-tax swap.
Not to be outdone, this year the governor and Legislature are proposing more gas taxes and new regulations that will again boost the cost of producing fuel, and drive up California’s gasoline prices. These calls for “shared sacrifice,” because we supposedly need more revenue, are coming from the same people who raided transportation funds during the economic downturn. When the voters tried to stop the state from taking local dollars by voting to approve Proposition 42 for local transportation, the “raiders” instituted the complex fuel-tax swap, shifting funds to the state, which is not likely to be reversed.
As the adage goes, “knowledge is power.” The factors that contribute to California’s high gasoline costs are complex and hidden for a reason. If consumers truly understood what they were paying for, they might decide to say something about it.