Research Debunks Newsom’s Price-Gouging Shtick – The American Spectator | USA News and PoliticsThe American Spectator

Sacramento, Calif. — It’s the dog-bites-man story of the month in Sacramento. Independent research from the USC Marshall School of Business has concluded that — drum roll, please — California’s sky-high gas prices are caused by “self-inflicted” regulatory and tax policies. There’s no evidence of price gouging by oil companies or retailers, despite Gov. Gavin Newsom’s and the Legislature’s attempt to blame greed for prices that are almost $2 a gallon more than the national average.

This should put an end to these absurd discussions, given the highly respected source of the report and the author’s thorough examination of 50 years of California gas prices. Here is USC researcher Michael Mische’s conclusion:

California has the highest tax, regulatory fees and cost burden per gallon of gasoline in the U.S., and that burden is anticipated to increase in 2025 and beyond. Included in or added to the retail price of gasoline at the pump is a litany of 6 different regulatorily mandated taxes, costs and fees such as underground tank storage fees, state and local taxes, the California special blend premium, the California Cap and Trade Program and other California environmental taxes.

Collectively, the report added, these requirements add $1.63 to the cost of a gallon, which nearly closes our price gap with other states. Because of the state’s high excise taxes, it “profits” four to five times as much as the gasoline retailer on each gallon sold, he added. Furthermore, the California Energy Commission reports that refineries over the last nine months were operating at a net loss on their per-gallon sales. If that’s gouging, then the word has an interesting meaning.

None of this should surprise American Spectator readers. As I explained in my column in October, after Newsom held an emergency legislative session to deal with the state’s soaring gas prices:

California imposes the highest gas prices in the nation. It requires a special “environmentally friendly” gas formulation that reduces supply and makes consumers susceptible to price shocks. It imposes the strictest regulations in the nation. Newsom and the Legislature are trying to shutter the industry and replace gas vehicles with electric ones, which has discouraged refiners from expanding capacity.

Obviously, USC could have saved the money and simply reviewed the many articles from this writer and others that have pointed out the results of years of state policies. One could argue — and this is not the slightest bit exaggerated — that state policy raises gas prices by design. After all, it plans to phase out the sale of new internal combustion engine vehicles by 2035 for reasons related to its climate fixation. It wants us to use less gasoline.

Attorney General Rob Bonta is now suing national oil companies, alleging per his office’s statement “that five of the largest fossil fuel companies in the world and API (American Petroleum Institute) engaged in a decades-long campaign of deception regarding the reality of climate change and the connection between combustion of fossil fuels and climate change, resulting in climate change-related harms in California.”

The California Air Resources Board (CARB) is working on a Low Carbon Fuels Standard that by its own earlier estimates (which it has now backed away from after criticism) would raise gasoline prices by as much as 65 cents a gallon. The state continues to push policies to discourage driving, so higher gas prices certainly work toward that end.

Meanwhile, as I explained on March 19, one prominent senator, Scott Wiener, D-San Francisco, has introduced a bill (Senate Bill 222) that “would authorize a person to bring a civil action … including damages of $10,000 or more, against a party responsible for a climate disaster or extreme weather or other events attributable to climate change due to the responsible party’s misleading and deceptive practices.” If your house burns down because of a wildfire, you could then sue the oil companies.

Advocates for our current policies continue to claim that some “mystery gas surcharge“ is the cause of the state’s price differential, but it’s no mystery why refiners are fleeing, supply is low, and our gas prices are higher than elsewhere. It doesn’t even make logical sense to blame national companies for corporate greed when their greed appears to dissipate at the state border.

As Mische added, “The Phillips 66 refinery that is slated to close represents 8.13 percent of California’s refining capacity. It’s doubtful that demand will drop commensurate with the closing of the refinery, and simple economics states that when supply drops more than demand, prices will rise.” Go figure, but chasing away refineries reduces supply and boosts prices, too. 

In response to a query from KTLA, Newsom’s office touted the success of a law he signed (requiring companies to store more petroleum) following the special session on price gouging. He credits it for avoiding the “severe gasoline prices spikes like the historic 2022 spike.” Even if that law did help — and that seems unlikely — it’s silly to continue with this price-gouging charade. 

Even though we all knew the reason before the study, it never hurts to have research to back up our point. And who knows, but maybe some lawmaker in Sacramento might even read it?

Steven Greenhut is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.

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