What can California do about its extremely high gasoline prices? Here are a few ideas

Note to readers: Each week through November 2019, a selection of our 101 California Influencers answers a question that is critical to California’s future. Topics include education, healthcare, environment, housing and economic growth.

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California Influencers this week answered the following question: What can California do about our extremely high gasoline prices?Below are the Influencers’ answers in their entirety.

Decrease Demand the Right Way

Michael Mantell – President of the Resources Legacy Fund

The recent release of the California Energy Commission report analyzing the state’s high gasoline prices is informative in concluding that big-name gas retailers have increased their prices even beyond the arguably inflated prices of their less well-known competitors. It easily leads to the obvious response that to lower prices we need to buy our gasoline from lesser retailers. Is anyone surprised that big oil continues to find ways to gouge consumers? In the face of climate change and likely continued gas price increases, we must push on the supply-demand curve more thoughtfully: by decreasing demand for gasoline in general. This means pressing forward with already launched technologies, such as full electric and hybrid vehicles and expansion of effective mass transit within and between the state’s cities and towns, as well as by investing in new, affordable technologies. Just as importantly—signaled by this question’s implicit focus on affordability—we must do this in ways that are accessible to all Californians. This means public subsidies not just for mass transit and charging stations, but for the new technology vehicles themselves, especially for low-income individuals and families.

Seek Greater Tax and Regulatory Alignment with Other States

Dave Puglia - Executive Vice President of the Western Growers Association

We have the highest gasoline taxes in the continental U.S. We impose the most stringent and costly regulatory requirements on energy production of any state. Even the franchise business owners who sell gasoline at the pump are burdened by California’s high costs of doing business, due to our highest-in-nation income tax and other factors. Perhaps in our desire to lead the way among the 50 states, we simply pushed costs so high that we lost sight of the fact that the accumulation of our tax, energy and business regulation policies is punishing working people to the point that other states look like oases. From production to distribution to retail sale, California policy makers should look to reform regulatory and tax policies affecting energy production and prices to move closer to our neighboring states. The same can be said for virtually every regulatory and tax policy affecting the state’s private sector job-creators.

“Broaden the appeal of alternative technologies”

Bernadette del Chiaro - Executive Director of the California Solar and Storage Association

California should do more to create downward pressure on gasoline prices by doubling down on reducing gasoline demand. According to the Department of Tax and Fee Administration the state consumed nearly a billion more gallons of gasoline in 2018 than 2010. Simple economics are at play: prices are high because demand remains high. If we lower demand, prices can be expected to follow. We still are not doing enough on this front.

The state should promote an all-solutions approach that includes becoming less vehicle dependent and promoting alternative cars. The uptick in electric vehicle usage is a great thing but we can move the mainstream market too. To do this, policy makers should avoid penalizing and/or removing incentives for early adopters, and instead broaden the appeal of alternative technologies for everyone.

Of course, solutions like electric cars requires us to build a more resilient grid. We can’t do that with status quo. We need to re-think our grid and the relationship between consumers, self-generation technologies like rooftop solar and batteries, and utilities. We need to invert the grid from the top-down centralized system of today, and build with smart, clean, local energy that puts the power of the sun in the hands of everyone.

It would be a good day if the only energy problem California had to worry about – not price fixing, international cartels, terrorism, refinery fires, asthma, climate change catastrophes, etc. – was a little cloud cover from time to time.

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“Appoint an independent task force”

V. John White - Co-Founder and Executive Director of the Center for Energy Efficiency and Renewable Technologies

The fastest and most certain way to reduce gasoline prices is to reduce demand for gasoline, by helping consumers find and use bus and rail transit, shared mobility, such as community ride share, and accelerating the deployment of battery electric and fuel cell vehicles, and renewable diesel. Governor Newsom has called on the California Energy Commission to conduct an investigation into gasoline prices, and the role of market power and oil industry profiteering. Unfortunately, these kinds of investigations have been done before, with little lasting impact. There are factual disputes surrounding the causes of California’s gasoline prices, and the Governor should appoint an independent task force, built on the model of the SB 901 Wildfire Commission, to investigate. The independent advisory commission, staffed by CEC and ARB, should study the causes and remedies to high gasoline prices, including the oil companies’ sustaining high prices long after supply disruptions are over, the need for the oil companies to expand storage of petroleum products to even out price spikes, and quantify the actual effect on gasoline prices of taxes and environmental regulations. An independent look at these issues, with recommendations for transparency and reforms, could help California sort out the facts and solutions and move beyond finger pointing to actions and results to benefit California consumers.

Upgrade California’s renewable energy transmission system

Danielle Osborn Mills – Director of the American Wind Energy Association of California and Principal at Renewable Energy Strategies

The long-term answer to California’s fluctuating gas prices is for all of us to rely less on fossil fuels for transportation. The state has a goal of putting five million new electric vehicles on the road in the next 10 years, all of which can be powered by reliable, low-cost, renewable energy. To get there, the state will need to upgrade and modernize its transmission system so we can safely tap renewable energy from across the west. We won’t be able to do this overnight, but we need to start making decisions and investments now.

Let’s ask and answer hard questions

Catherine Reheis-Boyd – President of the Western States Petroleum Association

“We should be asking ourselves, ‘how we can best balance the economy, environment, social equity and energy’ and make hard choices about policy based on that assessment. That’s not always our state’s approach. Sometimes, we blame and demonize and default to solutions that largely involve adding layer upon layer of costly regulatory programs on energy producers and others who power our economy.

“Rather, we need to be looking at the most cost-effective and least duplicative regulations that address our climate goals, not revenue goals paid by consumers. The recent California Energy Commission report notes that a major factor in our higher gas cost is ‘a number of readily explainable factors, like California’s additional program costs.’

“California’s regulatory environment plays the major role in the ever-increasing affordability challenges for consumers. The state’s numbers show $1.08 per gallon comes from taxes and California’s extensive regulatory regimen, such as the low carbon fuel standard.

“Let’s meet our state’s climate goals by working together through civil debate and honest assessment of the effectiveness of current regulatory programs, as well as what further innovation -- much of it by our industry -- can do to create a sustainable energy future. We may not always share the same politics, but we do share the same future.”

“Gasoline vehicles are destined to decline”

Kathryn Phillips – Director of Sierra Club California

First, California’s gasoline prices are high compared to the rest of the United States, but low compared to the rest of the developed world. In Europe and Asia, for instance, prices in the most developed countries are well above California’s.

Our prices are higher than the rest of the U.S. for a few reasons. One is that we have some of the worst air pollution in the country and some of the fees charged per gallon of gasoline fund pollution cleanup efforts. Another is that building and maintaining roads and bridges depends on another fee attached to each gallon of gasoline. We also have a different gasoline formulation to try to cut pollution, and that adds cost. Most drivers want smooth roads (and are frustrated by the lack of road maintenance) and clean air, so these added costs reflect what the public has said it wants.

What remains a bit of a mystery is why the gas prices here occasionally bump up for no apparent reason even as the price-per-barrel of oil remains relatively low. Some people believe the oil companies are engaging in market manipulation--sometimes for making more money and sometimes for trying to generate hostility to clean air fees. Given that the oil industry was unwilling or unable to answer some questions in the recent Energy Commission report about prices, it makes perfect and responsible sense for the governor to call for an investigation into gas price setting, as he recently did.

The best way to avoid the ups and downs of gas prices, and the public health impacts of its air pollution, is to transition our transportation system away from gasoline and towards battery electric vehicles. California has made a lot of progress in the clean vehicle push, as have other parts of the country and the world. Now there are dozens of electric vehicle models available, prices are coming down, and a secondary market is developing.

In the end, those high prices might just be a way for a dying dinosaur--the gasoline industry--to make as much money as possible in its waning years. Gasoline vehicles are destined to decline and electric vehicles are on the rise.

High Gas Prices: Obstacle or Opportunity?

Kevin de Leon – Senate President pro Tempore Emeritus

Governor Newsom is right - if fossil fuel companies are gouging customers in California, they must be stopped. Perhaps the conclusion of the Attorney General’s investigation will finally put to rest a decades-old debate over whether it’s state lawmakers or corporate greed driving high fuel prices. Regardless, the bitter irony about gasoline is that even though we need it to work, travel, and live our lives - it is choking the clean air out of our lungs. We pay a premium for gas at the pump, and with the worst air quality in the nation, some of us are paying for it with our lives. There is, however, a silver lining to this controversy; this age-old headline about skyrocketing prices at Golden State pumps. When old technologies get too clunky and expensive, the market often shifts to embrace more efficient and affordable options. The pressure of high gas prices isn’t just an obstacle - it’s also an opportunity to drive a broader adoption of more affordable, renewable energy sources in California and across the nation.

Building refineries could create jobs and reduce costs

James Gallagher – California State Assemblyman (R-Yuba City)

The most obvious thing we can do is reduce the high taxes on gasoline and modernize the regulatory requirements that do more than anything to raise the price for consumers. But going a little deeper we could also incentivize the citing and building of more refineries which create good jobs and would help reduce delivery costs.

Create policy that reduces the need to drive

Ben Allen – California State Senator (D-Santa Monica)

When the Torrance refinery explosion happened, oil prices shot up. But since the refinery has come back online, the prices haven’t returned to their old levels, when taking into account global market forces and pressures. Something is very fishy. A number of experts strongly suspect that oil companies in California have engaged in market manipulation for a number years now and it’s my belief that Governor Newsom is absolutely right to call on Attorney General Becerra to investigate price gouging in the industry. I was one of a group of legislators who called for this investigation a year ago.

Of course the reality remains that fossil fuels are a finite resource. Their use accelerates climate change and harms air quality. In addition to ensuring Californians pay a fair price at the pump, we are trying to transition drivers toward cleaner vehicles while helping to make alternative forms of transportation more accessible. The legislature has a clear imperative to move forward with investing in public transportation infrastructure, planning for an influx of autonomous vehicles, sending clear market signals to encourage the production of affordable electric vehicles, and better aligning our housing and transportation policies to reduce the need to drive in the first place. Just as we need to fight for consumers today, we also must ensure Californians have options beyond paying for gas at the pump, regardless of the price.

High prices will develop alternative technology market

Jim Newton – Editor in Chief, Blueprint Magazine, UCLA

I’m not sure California should be much concerned with high gas prices. Pricing is an important tool in the development and spread of alternative, clean technologies. That’s why a carbon tax is so appealing -- even if it remains a hard sell politically. In the meantime, high gas prices coupled with federal, state and local incentives for renewables -- electric car rebates, discounts on energy saving devices and the like -- will help develop the market for those products and move California and, ultimately, the world, away from fossil fuels. This has to happen. It might as well start now.

“Reverse aggressively regressive regulations on fuel”

Rob Stutzman – Founder and President, Stutzman Public Affairs

California politicians demanding investigations into high gas prices is a time honored ritual. Much like Louis was shocked to find gambling going on in Rick’s Cafe, our elected officials feign similar outrage at high energy prices…even thought they’re the principal cause. The nobility or folly of California’s climate change policies aside, if politicians want to do something about high gas prices they will need to reverse aggressively regressive regulations on fuel that drive up the price at the pump. The most notable driver is placing gas under California’s cap and trade scheme. The legislative analyst estimates that policy will add up to .73 cents a gallon to the price of gas next decade. At a minimum, lawmakers should be willing the itemize gas receipts so motorists can see the amount of taxes and regulatory driven costs they’re paying at the pump. No investigation needed.

“Make transportation a General Fund priority”

Kristin Olsen – Supervisor (First District), Stanislaus County

California could reduce the gas tax and make transportation a General Fund priority instead, reflecting the movement of people, goods, and services on safe and efficient roads as a core function of government.

“We have to grow smart”

Kate Gordon – Director of the Governor’s Office of Planning and Research

It’s true that Californians have higher prices than in other parts of the U.S., and it’s something Governor Newsom has asked the Attorney General to investigate. There’s a “mystery surcharge” in this state that’s not due to regulation or state taxes. Our Energy Commission, after extensive analysis, believes the extra cost has likely been added on by name brand retailers claiming their gas is somehow superior. But the Energy Commission couldn’t find any research to demonstrate that name brand gas is any cleaner than anything else sold in California.

In the bigger picture, we know gas prices are inherently volatile. As a global commodity, oil and gas rise and fall with all kinds of events that are outside California’s control: political instability in other nations and hurricanes in other states are two major reasons. When Hurricane Harvey hit Texas in 2017, the state was forced to close multiple refineries, and prices went up by 10 cents per gallon across the U.S.

The only way to get off this price roller coaster is to transition to cleaner vehicles and transportation options. There are alternatives available every day across California: electric cars with ranges up to 300 miles (many of these are finally coming into the used car market as well). Urban transit systems and regional rail. On-demand vanpools for more rural areas. Shared e-bikes, scooters, and old-fashioned walking, where possible, have the advantage of being far safer and healthier than getting into a car.

The Newsom administration is investing in every one of these solutions. Most important, Governor Newsom is committed to give Californians the greatest possible freedom from high gas prices by prioritizing affordable housing production near good jobs and services. As we grow to 50 million people by 2050, we have to grow smart. It’s time to spend less time in cars and more time with our families, friends, and communities – breathing cleaner air, getting more exercise, and giving our extra dollars to more worthy causes than Big Oil.

Dan Schnur, a veteran analyst and longtime participant in California politics, is director of the California Influencers series for McClatchy.