Get free daily email updates

Syndicate this site - RSS

Recent Posts

Blogger Menu

Click here to blog

Richard Rider

New study shows that CA gasoline taxes and fees total $1.19 a gallon (and arguably higher). CA is easily the highest in the nation.

An excellent SAN DIEGO U-T article details a study of the TOTAL gasoline taxes paid by Californians. It costs more than even I realized. We are the highest gas tax state — even higher than tax-crazed Hawaii.

The study concludes that the total CA gas tax currently is $1.19 a gallon.  But according to my calculations, it’s even more.  Included are some arcane taxes and mandates disguised as “fees.”

• The federal government charges an excise tax of 18.4 cents per gallon. 

• California’s excise taxes on gasoline come to 50.5 cents per gallon. That includes 12.7 cents per gallon from the controversial Senate Bill 1 that became law to improve infrastructure and develop transportation programs across the state. 

• Plus, there’s a state sales tax. It can vary by area but the Stillwater analysis estimated the sales tax averages 10.7 cents per gallon. Put together, Californians pay 79.6 cents per gallon in gas taxes. 

Now for the fees Noda says are often overlooked: 

• Underground Storage Tank fee of 2 cents per gallon. Established in 1991 following reports of numerous tanks leaking, the fee raises money to clean up underground petroleum storage tanks across the state. 
• Fuels Under the Cap fee, which is part of the state’s cap and trade program that requires suppliers of polluting fuels to purchase allowances to offset the emissions that result from burning those fuels. The fee varies depending on the price of the cap and trade allowances and currently comes to 14.3 cents per gallon. 
• Low Carbon Fuel Standard, which requires suppliers of fuels with high carbon intensity to purchase credits from makers of fuels with lower carbon, such as ethanol and biodiesel. This fee also varies but using recent prices, Stillwater estimated it at 22.6 cents a gallon. 

According to this article, the researchers left off one government mandated gasoline cost that is paid by customers.  Twice a year the CA refineries must retool their gasoline output to meet stringent CA standards. Apparently this mandate costs hundreds of millions annually.  Perhaps that is a “good” cost for the environment — but it IS a “pass through” cost that the study should have included when looking at the “gas pump” price of gasoline.

The article also ignored the DE FACTO restriction on either drilling for oil in CA, or building a new refinery.  The last CA oil refinery was built in 1977.  Several CA refineries have since been closed.

Sadly, the research stumbles when its authors puzzle over a second premium that customers pay at the pump:

UC Berkeley professor Severin Borenstein has looked into what he has called a “mystery gasoline surcharge” — an unexplained difference in price, even after all the taxes and fees are taken out of the equation. Back in 2015, an explosion at an Exxon Mobil refinery in Torrance knocked out about 10 percent of state’s gasoline supply, driving up prices. After normal operations resumed, prices went down somewhat — but Borenstein’s research indicated prices did not completely return to their previous, pre-explosion, levels. And that residual amount — the mystery surcharge — has never gone away. 

Borenstein’s calculations say the differential averaged at least 26 cents per gallon in 2016, 2017 and 2018 and shot up to 44 cents a gallon in 2019. Borenstein told the Union-Tribune last May he estimated the higher price added up to $27 billion to gasoline consumers. 

“There is something else going on beyond this that’s holding our prices up so high,” Borenstein said, adding, “We need to keep digging on this.”

The premium IS real. But the cause is easily explained.   It’s embarrassing that these economists couldn’t figure it out.

When the 2015 CA refinery explosion occurred — cutting CA gasoline production 10% — the oil companies discovered that — unlike ALL the other continental U.S. states — CA has made importing gas into California both expensive and difficult, if not impossible.

In the other states, that regional shortage would have been quickly dealt with, as gasoline was pumped in by pipeline from neighboring states.  Without such competitive pressures, government-isolated CA encourages oil companies to charge higher prices.  Thank our Sacramento politicians.

As a result, the nimble oil and gasoline distribution flexibility common in the other 47 continental states is not much of a factor in California.  There’s no gasoline pipelines from these other states into California. Perhaps more important, it’s tremendously expensive to twice a year change a refinery’s output to match the stringent requirements of CA, so out-of-state refineries don’t want to incur the cost.

I frequently point out the stunning economic illiteracy of elected people, so this “isolate CA” policy is no surprise to me.  But this CA windfall for oil companies might have darker origins. Most CA politicians and transportation bureaucrats want to end any use of gasoline-powered cars.  So higher gas prices at the voters’ expense has great appeal to such folks.

One commonly mentioned excuse that the researchers wisely ignored is that our high prices are the result of greedy oil company magnates.  But that silly explanation cannot explain why CALIFORNIA oil company owners are supposedly far more greedy than the oil company owners in all the OTHER states.

IF you want to read the FULL SAN DIEGO UNION-TRIBUNE article:

Tags: ,