Politico

Gas prices falling across U.S., but not in California

SACRAMENTO, Calif. — Gas prices are dropping for nearly everyone in the country but remain stubbornly high in California, where state officials are blaming oil companies and reminding voters that relief is on the way in the form of tax rebates scheduled to arrive in weeks.

Experts say factors to blame for the high cost of gas in California — now more than $5 a gallon — include problems at refineries that supply the state as well as higher taxes, more regulations and the same global issues driving the overall U.S. market.

Still, the cost of gas is something that consumers, and voters, tend to notice and can be problematic for elected officials with elections looming in November. California Republicans are seizing on the sustained prices as they hope to erode Democratic dominance in state government.

“The Legislature had an opportunity to provide real relief to Californians by suspending the gas tax,” Assemblymember Kevin Kiley (R-Rocklin), who is running for Congress against a Democrat in a Northern California district, said Tuesday. “Instead, the Supermajority opted to create a do-nothing Select Committee as an attempt at political cover. Now our residents are paying the price.”

California’s gas prices are nowhere near the $6 peak seen in June, but are still a source of anger. Rather than suspend the state’s gas tax, which is now up to 53.9 cents per gallon, Democrats this year opted to send $9.5 billion in direct payments to families.

The refunds were the result of months of tense back-and-forth between Gov. Gavin Newsom’s administration and legislative leaders over how best to combat inflation-driven increases at the pump. Talks of suspending the state’s scheduled gas tax increase, or pausing the tax altogether, fizzled early in the year — much to the frustration of Republicans and some moderate Democrats.

If prices persist, it could mean trouble for Democrats in battleground districts such as the Central Valley, where two Democratic hopefuls, Assemblymembers Adam Gray (D-Merced) and Rudy Salas (D-Bakersfield), are in tight congressional races with Republicans.

With the focus once again on California’s high prices, Democratic lawmakers in the most populous state were reminding the public Tuesday that rebate checks are on their way. State Sen. Nancy Skinner, chair of the budget committee, touted the refunds, which will be between $200 and $1,050 depending on filing status and income, in an email to constituents. Those payments are set to start appearing in Californians’ bank accounts in October, just in time for the general election.

Even in a good year, California’s unique gasoline policies make prices more expensive than other parts of the country. The state sets its own car emission standards and requires a specific blend of gasoline that means it can take longer for gas to make its way West in the event California experiences a shortage. So when prices jumped earlier this spring after Russia’s invasion of Ukraine, many called on the state’s leaders to forgo some regulations and taxes to ease the burden on consumers.

Democratic leaders have focused instead on the industry side. Assembly Speaker Anthony Rendon (D-Lakewood) in the spring convened a bipartisan group of lawmakers to investigate whether price gouging was to blame for California’s woes. The committee is tasked with gathering data and creating a report on recommended actions. It has met twice since its inception but has yet to offer any conclusions.

It’s a concern that has come up before, notes Severin Borenstein, director of UC Berkeley’s Energy Institute at Haas. Californians pay what he describes as a “mystery surcharge” that is the difference between what the industry charges in California, absent state taxes and fees, compared to other states. That surcharge has been a constant since 2014, he said, but tends to get extra scrutiny when oil prices go up. State efforts to investigate the surcharge in the past have been rebuffed by the gasoline industry, which has been reluctant to release sensitive price data.

“If you can figure out what the problem is and pass changes in the market regulations that get rid of the problem, that would help everybody,” Borenstein said.

Rendon, in a statement, said he still sees benefits in investigating the industry’s role in setting gas prices.

“We don’t hide our regulations and taxes, but they produce concrete benefits for Californians. Those include cleaner air and environment, and improved transportation infrastructure. Moreover, they are pretty consistent,” he said. “By contrast, we see oil company prices fluctuating frequently, with justifications kept obscure and without benefit to the consumers.”

“We need better information on what is driving gas prices,” the statement said.

Industry leaders have rejected the notion that California’s high prices are due to price gouging. Following Rendon’s announcement launching an investigation into prices, Western State Petroleum Association President and CEO Catherine Reheis-Boyd said lawmakers should instead focus on fixing their own “bad energy policy.”

“This Legislature and the Governor should be urgently addressing these policy matters rather than holding press conferences calling for more investigations that time after time have found our industry is acting responsibly,” Reheis-Boyd said in a statement.

But other experts say it’s not strictly the “mystery surcharge” nor California’s unusually high taxes and regulations that are to blame for the current high prices. Several refineries in the state are out of operation.

As of Friday, six of the approximately 12 oil refineries that supply California are undergoing maintenance, either unscheduled or scheduled, according to Doug Shupe, corporate communications manager for the Automobile Club of Southern California. That forces the state to import from abroad.

California’s high gas prices will likely persist for another three to four weeks, said Patrick DeHaan, senior petroleum analyst at GasBuddy. That could be just in time to spare Democrats like Gray and Salas from tough questions about high gas prices before the election.

“Once that gasoline does show up, and once refineries do fix their outages, the gasoline will start flowing,” said DeHaan. “Then, when supply goes up, prices will come back down.”

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