On Jan. 18, two days before Joe Biden took the oath of office, the price of gas was $2.46 nationally, according to the Energy Information Administration. On May 24, it was $3.11.
While part of that was the Colonial Pipeline shutdown, the upward trend had begun well before that, data shows. Either way, $3 gas was a shock to American drivers, particularly before the Memorial Day weekend; it’s the highest per-gallon prices America has seen since the Obama administration.
Yet, according to a member of The Wall Street Journal’s editorial board, you should enjoy it while you can. California drivers would love these prices, after all — and she believes you’re going to be seeing the same policies that caused those gas prices exported to the rest of the United States.
In a Friday opinion piece, Allysia Finley noted energy costs have long been skewed upward in the Golden State.
“Before the Colonial Pipeline shutdown, the national average gasoline price had exceeded $3 a gallon for only two weeks since 2014. Yet in California, gas prices in recent years have rarely dropped below $3,” she wrote.
“They now average $4.18 a gallon — $1.14 more than the national average — and in recent months have increased more than prices nationwide. Why do California drivers pay so much at the pump? Blame a higher-octane blend of taxes and environmental regulations.”
First, the taxes. California has long had a higher gas tax than the national average, Finley said. Yet, in 2017, the legislature passed a bill that increased the gas tax by 12 cents initially and 20.8 cents when all was said and done, according to the Los Angeles Times. That money was supposed to fund infrastructure repair (sound familiar?) which hasn’t really happened yet. While the gas tax will jump again on June 1, only half the work promised has been completed.
“The reality is that infrastructure repair was underfunded for decades and that neglect had no instant solution,” said state Assembly Speaker Anthony Rendon. “If we agree that we want improvements for our transportation system, we have to pay for them, and the gas tax made the most sense as the way to do that.”
California drivers currently pay 50.5 cents per gallon in taxes, and that’s set to increase to 51.1 cents on June 1. When local taxes are accounted for, Finley noted, taxes take up a whopping 63 cents of every gallon for the average Californian. The rest of America pays 36.8 cents per gallon.
But that’s not all the added costs California drivers are paying for when they pull up to the pump.
“The California Air Resources Board, or CARB, also imposes a de facto carbon tax through its cap-and-trade program,” Finley wrote. “Since 2013, refiners, oil producers and manufacturers have been required to reduce emissions or buy credits to offset them. The program adds about 14.3 cents a gallon to the retail price.
“CARB also requires gasoline retailers to sell a special extra-clean-burning gasoline blend, which adds another 10 cents a gallon to the price, according to University of California, Berkeley professor Severin Borenstein. In addition, CARB in 2011 implemented a low-carbon fuel standard, which requires refiners to reduce the ‘carbon intensity’ — meaning total emissions from production, transportation, refining and combustion — of the gasoline they blend, expressed as a ratio of mass emitted to energy produced.”
This extra-clean-burning blend causes other issues for California, since refineries there are turning to renewable fuels — more profitable — and out-of-state refineries aren’t set up to refine the specific CARB blend. Any refinery outage causes a spike of 50 or 60 cents in the state, therefore.
And not only does CARB have a byzantine way of determining how much each blend emits and how much you’ll end up paying for it, but they also subsidize electric cars, because of course, they do.
If Californians charge their electric cars at home, they get a $1,500 credit from their utility provider. That’s on top of the $2,000 California gives them for buying an electric car and the $7,500 the federal government doles out for buying an EV.
“Yet drivers of gasoline-powered cars are subsidizing the utility rebates through higher fuel prices,” Finley wrote. “As the state’s carbon-intensity benchmark has fallen, prices for regulatory credit prices have soared — from $17 on average in 2012 to $198 in the first quarter of this year. An analysis last fall by Stillwater Associates estimated that the program would add 24 cents a gallon to the price of gasoline this year and 63 cents by 2030.”
Finley predicts that “Californian drivers can soon look forward to paying more than $5 a gallon at the pump as the state’s green mandates ratchet up and gasoline refineries shut down or convert to renewable fuels.”
Well, if you live in the state, you have to pay the piper, right? The thing is, as Finley notes, “[p]rogressives are clamoring for the Environmental Protection Agency to emulate California’s low-carbon fuel standard as a way to subsidize electric vehicles.
“So enjoy your $3 gasoline. It may not last long,” she concluded.
Exporting Californian policy on gas and emissions to the rest of the nation seemed unthinkable until the day before yesterday. And yet, President Joe Biden has set a ludicrous goal of reducing our carbon emissions by half by 2030. This comes at the same time as he’s pushing a sweeping $2.3 trillion infrastructure bill that’s heavy on promoting electric vehicles and EV infrastructure.
There have even been rumblings Biden would resurrect something akin to Senate Majority Leader Chuck Schumer’s proposed 2019 cash-for-clunkers EV legislation, which would set aside a whopping $392 billion to get people to turn in their gas-powered cars to switch to electric vehicles.
For Democrats, gas is becoming like any other vice product — cigarettes and alcohol, for instance. It’s easy to sell a tax on them. And for now, it’s actually the Republicans who are trying to sell the president a hike in the federal gas tax as a way to compromise on the infrastructure bill, according to Reuters. Biden is against it for now, perhaps due to the backlash over the current gas price.
If you think any effort to get America to switch to EVs while trying to execute an overambitious infrastructure bill and reduce carbon emissions by half in less than ten years won’t include serious gas taxes, however, you’re likely wrong. Just look at California, which is trying to execute less ambitious programs on both fronts and have jacked up the gas tax to pay for it.
Now that the Democrats control the White House and both houses of Congress, expect a lot of California’s ideas to be exported nationwide. It remains to be seen whether we’ll see $5 gas or the concomitant price increases — after all, how do you think your produce gets to the supermarket? You can drive a Tesla and this is still going to hit your wallet in a major way.
Only time will tell whether Finley is a Cassandra or a Chicken Little. It’s worth remembering that a year ago, this wouldn’t have even been a question.
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