No Investigation Needed – Government Energy Policy Fuels Record-High Gas Prices

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Angry drivers paying record gas prices this year – surpassing $7 per gallon in parts of California – are demanding action from elected officials to lower gas prices.

Surprisingly, Sacramento Democrats have hung onto this scorching hot political potato for months.  Democrat legislative leaders have rejected pleas from Republicans and many in their own party to temporarily suspend the gas tax.

Meanwhile, they are fighting with Gov. Newsom over what form a tax rebate to address record gas prices and inflation should take.  While Speaker Anthony Rendon promises there will “certainly be something before October,” negotiations drag on.

Perhaps growing tired of the political 3rd degree burns they’ve been sustaining, Assembly Democrats this week tried passing the political hot potato, predictably, to oil companies.

At a Monday press conference, Democrats announced “they would investigate oil companies they say are ‘abusing a historic situation to suck profits from Californians’ wallets,’” the Associated Press reports.

A bipartisan committee will “investigate gas price gouging, with plans to question oil companies, regulators and economists to find out why California’s gas prices are consistently the highest in the country.”

No investigation is needed.  They need only look in the mirror to learn why Californians consistently pay the nation’s highest gas prices – state government policy.

A closer look at the facts shows that:

  • Government gas taxes, fees and energy mandates add about $1.30 to the price of a gallon of gas, according to the industry trade group Western States Petroleum Association.
  • Repealing California-only mandates on gasoline such as cap-and-trade regulations, low-carbon fuel standards, and more could save Californians between $9.5 billion and $9.6 billion annually according to PRI’s report Legislating Energy Prosperity.
  • Gas prices could climb even higher in California depending on the outcome of a major court battle over oil drilling permit approval in Kern County and the Newsom administration’s efforts to ban fracking in California, which would dramatically reduce in-state production.

California Business Roundtable president Rob Lapsley noted in a statement that, “the causes of gas price increases have been investigated repeatedly, with several Attorneys General finding no evidence or indications of collusion, price fixing, or price gouging . . . but when presented with the same conclusions on why gasoline prices are so high, prior Legislatures have chosen not to deal with the real issues, and the core causes have continued to exist and increase over time.”

Democrats in Congress have also been tossing the “price gouging” hot potato at oil companies, with the House recently passing legislation on the issue, while resisting demands for a gas tax holiday.

Surprisingly, President Biden is making a major break from Democrats in Washington and Sacramento by announcing his support for a three month suspension of the federal gas tax, which is 18.1 cents per gallon, and “the president also plans to call on states and local governments to temporarily suspend their gas taxes,” according to USA Today.

In a in a June ABC News/Ipsos poll, 72 percent of Americans said they disapprove of Biden’s handling of gas prices, while 74 percent said gas prices would be extremely or very important in casting their vote for Congress.

Unlike his fellow Democrats, Biden is reading the latest polls and has come to the realization that lack of action to meaningfully lower gas prices could lead to a political wipeout in November.

Don’t expect Sacramento Democrats to suddenly reverse course and heed Biden’s call to support a gas tax holiday anytime soon, especially in a town ruled by unions who don’t want to set a bad precedent – even though every penny of funding would be backfilled in an era of $100 billion state budget surpluses – of suspending a gas tax that funds infrastructure projects to be built by their members.

Tim Anaya is the Pacific Research Institute’s senior director of communications and the Sacramento office.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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