Southern California Gas Prices Climb at Their Fastest Rate This Year

September 18, 2023 By Carly Olson 4 Comments

Gas prices in Southern California shot up at their fastest rate of the year last week, according to data released by AAA.

A gallon of regular self-serve gasoline cost an average of $5.62 in the Los Angeles-Long Beach metro area as of Thursday. That is up 18 cents from last week and 38 cents from last month.

The national average price is nearly $2 less — $3.86 — up 6 cents from a week ago.

AAA officials blamed both regional and global factors for high prices, including the floods in Libya.

“Our pump prices have been skyrocketing as a result of regional refinery outages, as well as from increasing crude oil prices following deadly flooding in Libya, which will temporarily disrupt oil exports from that OPEC nation,” Doug Shupe, a spokesperson for the Automobile Club of Southern California, said in a statement.

Other parts of Southern California have seen similar eye-popping price increases.

In the San Diego metro area, the average price for a gallon of gas is $5.60, and in Riverside, $5.50. Both of those figures are up 17 cents from last week and 39 cents from last month.

On the Central Coast, a gallon will cost drivers an average of $5.53, 14 cents higher than a week ago and 38 cents more than last month.

It remains unclear when drivers might feel relief, but AAA officials said last month that California has increased oil stockpiles and imports, which may drive down wholesale prices soon.

Click here to read the full article in the LA Times

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California Gas Taxes Are Going Up Again. Here’s How Much You’ll Have to Pay

June 30, 2023 By David Lightman 12 Comments

California’s gasoline taxes are going up again Saturday.

That means there’s little hope that the price at the pump, already more than $1.25 above the national average, will come down soon.

There is a possibility the per-gallon price will drop 10 to 25 cents by Labor Day, said Patrick De Haan, head of petroleum analysis at GasBuddy, as supplies increase.

But prices drop only “if nothing happens” that would tighten supply. And stuff often happens. Refineries can shut down for various reasons. Demand spikes. Bad weather affects infrastructure.

De Haan was less concerned about the overall impact on prices of the increase in the state gasoline tax, which goes up 4 cents a gallon to 57.9 cents on Saturday. That’s nearly double the state gasoline tax rate nationwide, which is about 30 cents, the nonpartisan Tax Policy Center found.

The increase is an inflation adjustment required each summer under 2017 legislation that helps pay for road construction and maintenance.

Two-thirds of the money from the gasoline and diesel fuels tax goes to state highway programs, while the rest goes to cities and counties to help with local street and road maintenance and construction.

Republicans in the California Assembly tried to delay the tax increase for a year but the effort failed Tuesday.

GOP lawmakers warned that the higher gasoline prices will rippled through the economy.

“Pushing the gas tax even higher means families will have fewer opportunities and less food on their table,” said Assemblywoman Laurie Davies, R-Laguna Niguel, who pushed the amendment for the delay. “That is not the California I want to live in”

As of Wednesday, the price of a gallon of regular gasoline in California averaged $4.83, according to AAA.

In Sacramento, the average was $4.73. Other averages Wednesday in metropolitan areas: Fresno, $4.77; Modesto, $4.63; Merced, $4.75, San Luis Obispo, $5.12.

The national average Wednesday was $3.56.

Click here to read the full article in the Sacramento Be VIA Yahoo News

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Newsom Signs Watered-Down Oil Profit Penalty Into Law

March 30, 2023 By Alexei Koseff 4 Comments

For six months, Gov. Gavin Newsom waged a highly public battle against the oil industry, accusing companies of fleecing Californians as gasoline prices soared to record levels last year and urging lawmakers to claw back the excess profits to return to taxpayers.

He finally got to take a victory lap today as he signed a first-in-the-nation law that could lead to a cap on earnings for oil refiners. 

“We proved we can actually beat Big Oil,” Newsom said during a ceremony under the state Capitol rotunda.

But the measure Newsom signed is still a far cry from what he initially suggested in the fall, reflecting the political perils inherent in taking on an industry that may be a major villain for liberals but also provides a product used daily by millions of Californians.

Nor is this particular showdown likely over. 

A representative for the oil industry, which fiercely fought the governor’s efforts, said refiners who operate in the state will closely monitor the development of regulations under the law and whether the Legislature pursues additional bills to address their lingering concerns before deciding whether to mount a legal challenge.

“Then we’ll have a better sense of, will this work, and do we need to step in?” said Kevin Slagle, a spokesperson for the Western States Petroleum Association.

Newsom set off a frenzy at the end of September, as the average price of gas at the pump surged past $6 past per gallon, when he called for a windfall tax on oil company profits, an idea favored by progressives that has never gained traction at the Capitol. Within a week, he announced that he would open a special legislative session later in the year to push for the proposal, using a penalty on excess profits to fund a rebate for taxpayers.

At issue were California’s retail gasoline prices, which are not only expensive, but far more expensive than the rest of the country — by last fall, the gap had grown to more than $2.60 per gallon higher than the national average, an ignominious record. The oil industry says this is caused by greater taxes and regulations in the state, but Newsom argued that greedy companies were taking advantage of global shortages.

“This is one of the greatest rip-offs in modern American history that’s been happening here in California,” Newsom told reporters after signing the bill.

Though many legislators agreed with the governor’s assessment that taxes and regulations alone could not explain the steep prices their constituents were paying, his initial plan — to set a cap on refiner profits and fine those who exceeded the threshold — stalled for months at the Capitol without action. Even Democratic allies feared that, without more information, they might unintentionally create a disincentive for gasoline production, further constraining supply and leading to even higher costs for drivers.

The compromise, unveiled less than two weeks ago, shifts the process to state regulators. Oil refiners will be required to report additional data about their operations and a new watchdog division of the California Energy Commission will investigate alleged price gouging by the industry. That could inform the commission to establish a profit threshold above which companies would be assessed a financial penalty, though the rule-making process is merely authorized by the new law, not mandated.

It will be years before that happens, if it ever does at all. Newsom said today that it will take nine to 12 months to establish the new division of the energy commission. But he insisted that it would be an improvement over his original plan for a windfall profits tax, because of the long-term oversight of the oil industry that it could provide.

“This is 10x better,” he said. “This is more than we even could have imagined in late September when we had the first conversations around this.”

Legislative Democrats raced over the past week to pass the proposal before they leave town at the end of the month for their spring recess, earning howls of disapproval from the oil industry and Republican lawmakers, who argued that the rushed timeline did not allow them to fully vet the bill. Because it was passed through a special session, which the Legislature closed on Monday after a final vote in the Assembly, the law takes effect in 90 days.

“The Governor’s proposal, modeled after ideas that have empirically failed, will disrupt the energy market and ignore economic reality where ultimately every single Californian will bear the direct as well as the unintended consequences and costs,” Assemblymember Vince Fong, a Republican who represents part of oil-producing Bakersfield, said in a statement.

Slagle of the Western States Petroleum Association said oil refiners take issue with the amount of data they will be required to report, the lack of privacy safeguards for that sensitive information and a provision of the bill that they contend would allow the state to interfere with their maintenance schedules.

If those points are not resolved in follow-up legislation, Slagle said the industry could potentially sue over the law. An unfavorable profit cap rule developed by the California Energy Commission would also be ripe for a legal challenge.

“We’re concerned about how that all turns out,” Slagle said. But, he added, with this heavily politicized clash at the Capitol now over, “We’re hopeful that we can shift to having a conversation about the real issue here, which is the supply of fuels.”

Newsom sarcastically dismissed the notion of making the changes that the oil industry is seeking. He said he did not trust the industry’s talking points, which he characterized as an attempt to push back on an outcome that it does not like.

“What are they going to do? Spend some of their billions of dollars, try to go after us, try to demean us, try to lie to you, try to manipulate,” he told reporters. “That’s status quo here. Give me a break. I’m just sick and tired of those guys.”

Click here to read the full article in CalMatters

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This Is How Much Money You’ll Get From the California Gas Rebate

October 16, 2022 By Grace Gedye Leave a Comment

California is sending money directly to millions of residents to help with rising costs and high gas prices. 

The payments, which started going out Oct. 7, range from $200 to $1,050, depending on income and other factors. About 18 million payments will be distributed over the next few months, benefiting up to 23 million Californians. The cash payouts are part of a June budget deal. 

CalMatters talked to the state’s Franchise Tax Board to parse what all this means for you. Check out our tool at the bottom of this article to find out how much you’ll get.

Are you eligible?

To be eligible, you need to have filed a 2020 California tax return by Oct. 15, 2021. There’s an exception for people who did not file by the October deadline because they were waiting on an Individual Taxpayer Identification Number (so long as they filed by Feb. 15, 2022). 

People who didn’t file taxes for 2020, including some seniors and disabled people, will be left out. 

People who can be claimed as dependents for tax purposes won’t get their own payments. 

The payments also won’t go to married or domestic partners who have an adjusted gross income over $500,000. Same goes for many individuals who have adjusted gross incomes over $250,000.

You also had to be a California resident for at least six months of 2020, and be a resident when your payment is issued. 

Undocumented Californians with a valid taxpayer number or Social Security number, who filed complete 2020 tax returns and meet all of the eligibility requirements, can receive the payments.

You don’t need to send any additional forms, or fill out any application to get the payment.

How will you get the payment?

People who are eligible for the payment will get it either via a direct deposit to their bank account or by mailed debit card, according to the tax board. Generally, people who filed their 2020 tax return online and received their state tax refund via direct deposit will get a direct deposit. Most other people who are eligible will get debit cards in the mail. The envelope will be clearly marked with the phrase “Middle Class Tax Refund.”

When will you get the payment?

The first round of payments will go to people who received one of the two Golden State Stimulus payments from 2021 and are eligible for a direct deposit. The first round of payments are expected to go out between Oct. 7 and Oct. 25. 

The rest of the direct deposits are expected to go out between Oct. 28 and Nov. 14. The tax board expects 90% of direct deposits to be sent out in October, according to its website. 

Debit cards for people who got one of the Golden State Stimulus payments are expected to be mailed out between Oct. 25 and Dec. 10. All of the remaining debit cards are expected to be mailed by Jan. 15

Why can’t they all be sent out at once? “There are constraints on the number of direct deposits and mailed debit cards that can be issued weekly,” Franchise Tax Board spokesperson Andrew LePage told CalMatters. “Logistically it takes time to deliver approximately 18 million payments to Californians effectively and accurately, protecting both taxpayers and California.”

Click here to read the full article at CalMatters

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Who’s to Blame for California’s High Gas Prices?

October 12, 2022 By Dan Walters 6 Comments

As the inimitable Yogi Berra once said, it’s déjà vu all over again.

As gasoline prices spiked last week, Gov. Gavin Newsom denounced oil companies and called a special legislative session to impose a new tax on their profits.

 “Crude oil prices are down but oil and gas companies have jacked up prices at the pump in California. This doesn’t add up,” Newsom said. “We’re not going to stand by while greedy oil companies fleece Californians. Instead, I’m calling for a windfall tax to ensure excess oil profits go back to help millions of Californians who are getting ripped off.”

Newsom is only the latest governor to promise a crackdown on oil companies when pump prices spike. Over the years, there have been numerous investigations into why California’s prices are markedly higher than those of other states, but there’s never been any conclusive proof of collusion.

Rather, it’s been repeatedly demonstrated that California’s relatively high gas prices are largely, if not completely, explainable by unique factors such as the state’s particular refining recipe meant to minimize smog-producing emissions, its high taxes, and its overall high cost of doing business.

More recently,  California has seen decreasing refining capacity due to the state’s commitment to eliminating gasoline-powered cars and trucks and shifting to “zero emission” vehicles powered by batteries or hydrogen.

Refiners are unwilling to invest in production upgrades when their operations face state-mandated phaseout, and as in-state refining declines California is no longer a self-contained fuels island. It becomes increasingly subject to the global commodities market with the disadvantage of requiring specially formulated fuel that cannot be readily obtained from outside sources.

“California policy makers have knowingly adopted policies with the expressed intent of eliminating the refinery sector,” Valero vice president Scott Folwarkow told the state Energy Commission in a letter. “California requires refiners to pay very high carbon cap and trade fees and burdened gasoline with cost of the low carbon fuel standards. With the backdrop of these policies, not surprisingly, California has seen refineries completely close or shut down major units. When you shut down refinery operations, you limit the resilience of the supply chain.”

Amy Myers Jaffe, managing director of the Tufts University Climate Policy Lab, alluded to the decline in refining in an interview with the Los Angeles Times.

“Do I have the new infrastructure fast enough before I retire the old infrastructure, and what happens if you’re in the middle?” Jaffe said. “The way we’re doing it now is you just let the fuel costs go up and then we leave poor people with no ability to get anywhere… . And then [California leaders] grandstand against the oil companies — that’s not a solution.”

The Times article pointed out that various authorities have been warning Capitol politicians for years that California needs plans to manage the shift to renewable transportation while maintaining gasoline supplies until they are no longer needed, but the pleas went unheeded.

So what will come of Newsom’s special legislative session for a tax on windfall profits? Legislative leaders seem to be lukewarm at best. They know that rounding up two-thirds votes for such a tax would be difficult despite Democrats having supermajorities in both legislative houses, especially if Newsom cannot provide rock-solid evidence of oil company malfeasance.

The industry will argue that such as tax would merely be passed on to consumers in even higher pump prices and/or constrict supply even more.

Click here to read the full article at CalMatters

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California ‘Windfall Gas Tax Profits:’ Gas Now $2.55 Above the National Average

October 10, 2022 By Katy Grimes Leave a Comment

‘Governor Newsom and Capitol Democrats are as dumb as they want to be’

Californians are paying the highest gas prices in the entire nation thanks to the state’s “windfall gas tax profits.” The average price for a gallon of gas in the U.S. is $3.891 according to AAA. California’s average price for a gallon of gas is $6.392. This means Californians are paying a $2.55 premium on gas in many locations.

Gas in Mono county California is $7.82 per gallon.

The lowest gas is in Mississippi at $3.205 per gallon. Texas comes in at $3.232, Florida is $3.289, and Georgia is $3.207.

Notably, “It has now officially been 211 days since the Democrats promised action on soaring gas prices,” Assembly Republican Leader James Gallagher (R-Yuba City) said Thursday.

“Governor Newsom and Capitol Democrats are as dumb as they want to be. People have friends in other states who are paying around $3.50 a gallon. It’s laughable and Californians aren’t buying it,” Gallagher said.  “Another dismal record the state set earlier this week shows that California has the worst maintained roads in the nation, even though most of the gas tax is intended for road maintenance.”

A new report found “44% of California’s roads analyzed were in poor condition. That’s the highest of any state, MoneyGeek said. Only 22% of the state’s roads were in good condition.”

Assemblyman Kevin Kiley (R-Granite Bay) also weighed in, and he addresses Gov. Newsom’s threat to call a special legislative session for the sole purpose of raising taxes. Again.

“Gavin Newsom is considering a Special Session of the Legislature for a single purpose: raising taxes. That is the last thing California needs,” Kiley said. “Newsom’s proposal, a new tax on suppliers, will inevitably make gas prices even higher. For those keeping score, prices in California are now $2.56 above the national average and our state budget has grown $100 billion since Newsom took office.”

“If Newsom does re-convene the Legislature, he’ll be sending the Supermajority into a trap. I’ll use the opportunity to force a new vote on suspending the gas tax, and we’ll see if they’re willing to oppose it again as ballots land in mailboxes.”

As for Gov. Newsom’s special session of the Legislature in response to rising gas prices, “We’re hoping to do more with this windfall profits tax to go after big oil,” he said Thursday at the climate change compact signing in San Francisco.

Newsom’s solution is to accuse oil companies of hoarding “windfall profits,” and to impose additional taxes. This isn’t a climate plan, but a tax plan.

Assemblyman Kevin Kiley had a solution to California’s highest-in-the-nation gas prices, but in March, Democrats on the Assembly Transportation Committee hijacked Kiley’s bill by passing amendments to gut the bill so they could not be accused of voting for the gas tax increase. Kiley proposed to suspend California’s .51 cent gas tax (CA gas tax is now .54 cents). At the hearing, Kiley noted that Maryland and Georgia had just reduced their gas taxes, and the people of those states saw immediate results. He said rebates are a good idea, especially with a substantial state surplus, and should be much larger, returning to overtaxed tax payers more of their own money.

Democrats diddled for 100 days to provide relief at the pump for the state’s drivers from the record high gas prices,” the Globe reported in June. California Democrats abandoned the opportunity for a gas tax holiday, and then announced they were forming a new committee to investigate gas price gouging to make it appear they were doing something.

Read more about Gov. Newsom’s new “windfall profits tax” on oil companies.

Here are some of the policies implemented in California that drive up the cost of gasoline:

  • 51.1 cents – State gas tax (add an additional 3 cents starting July 1.)
  • 25 cents – Cap and Trade (estimate)
  • 22 cents – Low Carbon Fuel Standard (estimate)
  • 2 cents – Underground Storage Fee
  • 10-15 cents – California’s switch to summer-blend costs more to produce than other types of gasoline. Source.
  • 14.4 cents – State sales tax (estimate based on 6/20 average price)

Click here to read the full article at the California Globe

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California Gas prices Hit Record Highs, With OPEC+ Move Sparking Worsening Economic Threat

October 7, 2022 By Summer Lin, Ronald D. White 5 Comments

As gas prices hit record highs in Los Angeles on Wednesday, a pledge by OPEC+ to reduce its oil production by 2 million barrels a day brought concerns about more economic pain to come.

California is facing surging oil prices in the wake of shutdowns at several oil refineries that produce a specific grade of fuel for the state. Prices began to creep up in September after months of declines. And unlike the nationwide rise in gas prices over the summer, this most recent spike is mostly confined to California and the West Coast. 

There was also debate among experts about the effect of the move by OPEC+, which amounted to the biggest reduction since 2020 and was designed to boost sagging oil prices.

It remains unclear how the reduction would affect pump prices, but experts said it poses another threat to the shaky global economy amid growing concerns about an impending recession.

The OPEC+ move comes a month before crucial midterm elections in the U.S. President Biden and other Democrats hoped the decline in gas prices in recent months would help them with an electorate angry at rising inflation and concerned over an economic downturn.

In March, Biden announced the U.S. would release of 1 million barrels of oil per day from strategic reserves for six months in hopes of easing gas prices.

“When President Biden released oil from the Strategic Petroleum Reserve, it hurt OPEC in terms of revenues. Most of that oil went to refiners,” said Phil Verleger, a Denver-based oil expert who formerly served as a senior staff economist on the Council of Economic Advisors. “Now, OPEC wants some of that money back. But Biden has already said he will release more from the reserve to counteract this.” 

Verleger added that California’s record fuel price spike “is because of refining issues, not because of crude prices.”

Tom Kloza, an expert in energy prices who serves as global head of energy analysis for the Oil Price Information Service, also said OPEC+‘s decision should not hit California motorists too hard. 

“I don’t think the crude agreement from OPEC will have much impact,” Kloza said. “A lot of the California refineries that have been out of service because of planned maintenance and unanticipated problems are coming back online and resuming production. You might see another increase over the next couple of days, but that should be it.”

The average price for a gallon of regular gasoline in Los Angeles ticked up to $6.494 on Wednesday, increasing five-tenths of a cent overnight, according to data from the American Automobile Assn.

Gas prices for regular fuel have jumped by more than 38 cents in Los Angeles since a week ago. This time last year, the average price was about $5.28 a gallon.

The Wednesday announcement by OPEC+, a coalition of oil-producing countries, to cut oil production by 2 million barrels a day also raised fears that the move could hurt the global economy.

Before the announcement, Moody‘s Investors Service said that any plan to raise oil prices now would likely fail and maybe even backfire. 

“In our view, elevated oil prices cannot be sustained for long because of economies’ limited ability to absorb higher oil costs and continue growing,” said a note by Moody’s senior vice presidents Elena Nadtotchi and Madhavi Bokil. “A persistently high cost of oil would impede economic growth and hasten substitution to alternative sources of energy, leading oil prices to eventually fall to the reinvestment price range.” 

Severin Borenstein, faculty director of the Energy Institute at UC Berkeley’s Haas School of Business, said the OPEC+ decision “might add 10 to 15 cents to the price of a gallon of gasoline.” 

“That will be swamped by the number of refineries returning to service and by California’s switch to cheaper winter-blend gasoline,” he added. 

Biden said he was “disappointed by the shortsighted decision,” while White House national security advisor Jake Sullivan and National Economic Council Director Brian Deese confirmed that the U.S. would release an additional 10 million barrels of oil from the Strategic Petroleum Reserve next month in response. 

The Golden State has experienced the steepest hike in gas prices in the U.S., climbing to an average of $6.42 per gallon for regular fuel Wednesday and causing Gov. Gavin Newsom to shift to the state’s cheaper, winter-blend gasoline. 

Other Western states, such as Oregon and Washington, have also seen increases. 

“With gas prices continuing to surge on the West Coast and Great Lakes, the national average saw its second straight weekly rise,” Patrick De Haan, head of petroleum analysis at GasBuddy, said in a blog post. “But at the same time, areas of the Northeast and Gulf Coast have continued to see declines as the nation experiences sharp differences in trends between regions.” 

De Haan said that West Coast states have seen gas prices rise between 35 and 55 cents per gallon in the last week but that Californians should expect some relief at the pump soon, despite the OPEC+ news.

De Haan called it “very nuanced right now because of refinery kinks” but predicted gas prices will fall in the West Coast, Great Lakes and other areas experiencing price surges, while increasing in the East Coast, Southeast, South, Gulf and Northeast because of the OPEC+ decision. 

“The worst appears to be over for California. … Price differentials are plunging, with gasoline values down some 45c/gal,” he tweeted Wednesday morning. “This will take a few days for stations to start getting the cheaper fuel, but lower gas prices are coming!”

Click here to read the full article at the LA Times

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California Gas is ‘Out of Whack’ – Nearly $2 More than National Average. Who’s to Blame?

September 28, 2022 By Eliyahu Kamisher 10 Comments

California has long been known as the country’s priciest place to fill up your tank, but these days the Golden State is “completely out of whack.”

As gas prices plummeted around the nation in recent weeks, California’s price at the pump has rebounded with a vengeance to an average of $5.58 a gallon.

That’s $1.89 more than the national average — the highest price gap in at least 22 years, according to a Bay Area News Group analysis of AAA data.

While Russia’s invasion of Ukraine drove prices higher around the world, California’s perplexing price swing is largely due to the local oil industry, experts say, which is putting the state on another planet when it comes to gas.

“The commodity price of gasoline in California has gotten completely out of whack,” said Severin Borenstein an energy economist at UC Berkeley. “If this holds, we’re just starting to see the increase. It’s going to go up even more.”

Although fuel costs are still down from their peak in June, drivers are contending with nearly seven months of average prices topping $5 a gallon.

“It’s unfair,” said Sonya Khvann, a single mother of three, who was pumping gas in Alameda on Friday. She spends about $800 a month on fuel shuttling around her children. “It’s not like you can change your career overnight,” said Khvann, a part-time real estate agent. “Not everyone can be in tech.”

Much of California’s high gasoline costs are explainable. The state’s 54-cent gasoline excise tax is among the highest in the country — only Pennsylvania’s is higher. There are also stricter environmental regulations and special fuel blends that prevent rampant smog from accumulating in cities, altogether these factors tack on roughly $1.20 to California’s gas prices.

But the widening gap between what everyone from San Jose to Los Angeles is paying compared to the rest of the country is due to the concentrated nature of California’s oil refineries, experts say. Due to the state’s special gas blend, California is often termed a “fuel island” because nearly all gas sold in the state is refined locally by a handful of companies, including Chevron, Marathon Petroleum and PBF Energy. That means mechanical hiccups at refineries can cause major price spikes not seen elsewhere in the country.

Tom Kloza, of the Oil Price Information Service, said the reduced flow of gas is likely due to refiners bringing equipment offline for maintenance. He said much of the oil industry deferred regularly scheduled maintenance in spring so they could continue reaping record profits during the energy price spike following the Russian invasion.

But it’s hard to get to the bottom of exactly why California’s oil refiners have reduced output now just as prices drop elsewhere. There has been no major refinery outage or catastrophe reported in recent months. Instead, experts glean information from oil production reports. “Because of antitrust regulations, we don’t know how individual refineries are operating,” said Kevin Slagle, vice president of the Western States Petroleum Association.

In a statement, the California Energy Commission said state refineries are seeing “temporary” production issues that, coupled with maintenance activity and “lower-than-normal gasoline inventories,” is driving the current price spike over the past four weeks.

The mysterious price surge comes as California Gov. Gavin Newsom has turned up the rhetoric against the oil industry as the Golden State moves to phase out most gas-powered vehicles by 2035 and expand restrictions on drilling. In a statement on Friday, Newsom’s office accused fossil fuel companies of “holding families hostage” while touting Sacramento’s plan to send up to $1,050 to California families to alleviate the financial pain.

“We’re phasing out the fear of gas prices and ushering in our oil-free future,” Newsom’s office added.

Borenstein has spent years studying the gap between California’s gas prices and the national average. He said the unaccounted-for difference, which he termed a “mystery surcharge,” took off in 2015 when gas prices spiked in the aftermath of a Torrance oil refinery explosion. Before the blast, the unexplainable price gap was about 2 cents, but afterward it ballooned to over 40 cents and has remained high ever since.

Kloza, Borenstein and David Hackett, an energy expert at Stillwater Associates, said there is no evidence of racketeering among the state’s oil refineries. There is an ongoing probe into gas pricing and oil industry practices in the State Assembly, however. Sacramento has a long history of accusing the industry of price-gouging and announcing investigations that yield few results.

Click here to read the full article at the OC Register

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Californians can’t catch a break as gas prices spike again

September 11, 2022 By Chunzi Xu 2 Comments

The ongoing heat wave is raising the risk of blackouts on top of perennial drought and fires. And now, after enduring record pump prices in June that were much higher than the national average, Californians face surging gasoline costs again at the end of the summer travel season when they typically fall.

Pump prices jumped 10 cents a gallon in a week in Los Angeles County and the Inland Empire and 13 cents in Orange County, according to auto club AAA. Record wholesale premiums signal they could rise even further. At the state level, retail prices average $5.34 a gallon on Friday, 4 cents more than the previous day.

The confluence of bad news highlights how vulnerable California’s energy systems are to supply disruptions. The state is an energy island, cut off from crude and fuel hubs in the Gulf Coast and Midwest by the Rocky Mountains. Regulators require a boutique grade of cleaner-burning fuel that few refineries are geared to produce outside of the state. As a result, fuel shortages take time to resolve and price spikes are far more common than elsewhere in the country.

Gasoline stockpiles on the US West Coast have fallen by 11% since the beginning of August amid a lack of imports to their lowest level in about seven years, data from the Energy Information Administration show. The California grade of gasoline known as Carbob also saw inventories drop to 8% below the five-year average for this time of year, according to the California Energy Commission.

Refiners in the state are running harder, but hot weather and a stressed power grid may be causing some problems. Excess heat challenges the water cooling system in refineries, and one way to handle it is to cut operation rates, said John Auers, managing director at RBN Energy.

“Heat, along with the way the power grid is being managed, can be contributing to the refinery issues,” Auers said in a phone interview. A string of incidents recently surfaced in Southern California and may have spooked traders in the spot market, which sets the basis for retail prices.

Click here to read the full article at the OC Register

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Midterm forecast: Gas prices get GOP control of U.S. House

July 6, 2022 By Jonathan Lasner 1 Comment

If control of the House of Representatives flips to the Republicans this fall, economist Jim Doti thinks he found the issue driving political change: the gas pump.

Chapman University’s veteran economic forecaster was trying to see which historic economic, demographic or voting patterns factors might provide numerical hints for November’s midterm elections in which control of the House is at stake.

Doti’s formula suggests Republicans will gain control of the House by flipping 53 of the legislative body’s 435 seats to the GOP side of the political aisle in November. The flip isn’t terribly stunning considering the party controlling the White House has lost an average 27 seats in midterms since World War II. And over the July 4th weekend, forecasters at fivethirtyeight.com gave the GOP an 87% chance of winning the House in the first fall projection for 2022.

Political track records are not fool-proof prognostications of future election results. But Doti was startled to discover the pivotal vote-changer that’s bad news for President Joe Biden and his Democrats: record-high gasoline prices.

“First of all, let me say that this was a big surprise to me,” Doti says.

Price points

Pain at the pump was not on Doti’s mind when he started the research with fellow Chapman professor Fadel Lawandy. He was betting big vote swings followed inflation, which in 2022 is running at 40-year highs.

But when the professors looked at voting patterns vs. traditional measures of the cost of living, such as the Consumer Price index, Doti said “I found nothing, even when you look at some of our high inflationary periods.”

So gasoline prices were input into his formula, and to the professors’ astonishment, fuel inflation was a significant political driver. The out-of-power party gained more House midterm seats when gasoline was pricier.

Equally noteworthy were the only two times the party in the White House grew its political base in the House at the midterms — Bill Clinton’s second term (1998) and George W. Bush’s first term (2002).

Gas prices were falling in both of those outlier periods.

So why is gasoline — a relatively modest expense for many Americans — such a political flash point? It’s the simplicity of the economic measurement.

“People every week fill the tank. They see these big prices,” Doti says. “It’s not like reading the CPI. Or reading the Wall Street Journal. It’s affecting their pocketbook, and they get it. They’re agitated.”

Bad start

Doti’s research shows the Democrats start the midterm political season in a weak position.

The model revealed Democrats’ modest House advantage — it’s currently only a 10-seat edge — translates to 10 seats lost come November.

Biden’s unpopularity doesn’t help. The president scored a low approval rate of 41% in May, according to Gallup. That compares with an average of 51% at the same moment for presidents since WWII. The Chapman formula says that adds up to nine more lost Democratic seats.

Yes, there’s decent economic growth — Biden’s 2.8% gross domestic product expansion is better than the 2.5% post-WWII average. But that earns Democrats only one seat by this math.

And a Republican winning Virginia’s governorship — an election that’s proven to be a leading indicator of political fortunes — translates to a six-seat House pickup for the Republicans, says the formula.

Then ponder gas prices — up 61% in a year vs. average hikes of 2.5% annually. That pump pain is worth 29 seats for the Republicans — literally giving them the House if this Chapman forecast is correct.

You don’t need an economics doctorate to understand that if folks vote with their wallets, gas prices are an obvious winner for Republicans. And a psychology degree isn’t required to comprehend the emotional response gas prices can create — and voters often act with their hearts.

To me, though, what will be intriguing to watch is what voters think this fall about topics hard to quantify. The Supreme Court’s actions on reproductive rights or gun control. Or the hearings into the January 6 insurgency.

I’ll note that 1974’s midterms — when the Republicans controlled the White House and lost 48 House seats — were the party’s second-worst outcome since World War II. By the way, the 50 seats lost in Dwight Eisenhower’s second term in 1958 was the GOP’s biggest drop.

What was up in 1974?

Gas prices jumped 33% to 53 cents per gallon. Inflation ran at 11%. But Richard Nixon also resigned from the presidency. Oh, and it was the first midterm election after the Supreme Court made abortion a right in every state in Roe vs. Wade.

Sketchy tale

Doti tells the tale of a recent visit to a Chapman University graphic design class.

Students were assigned to draw a political cartoon. Doti was there to provide some economic background highlighting the nation’s inflation challenges.

And what was the theme of the graphic professor’s favorite cartoon from the assignment? A humorous sketch of a gas station where the price was artfully displayed at $18.89 a gallon.

“That brings home the fact people see it, it’s transparent,” Doti says of the fuel pump’s political power. “The analysis clearly shows gas prices affect how people vote in midterm elections — but not the overall trend in consumer prices.”

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