By Tim Anaya and Wayne Winegarden
As of April 5, average state gas prices in California were $5.84 per gallon for regular, according to AAA, which were the nation’s highest average gas prices.
Previously on Right by the Bay, we wrote about the one-upmanship between Democrats and Republicans in the State Legislature – debating dueling proposals to give Californians relief from climbing gas prices.
Yet, whether suspending the gas tax (which would save about 51 cents per gallon) or providing a $200 or $400 per vehicle rebate (which proponents say would provide equivalent relief), these proposals will only provide a minor amount of relief from astronomical gas prices.
Californians would surely welcome effectively paying $5.40 per gallon for gasoline versus the current nearly $6 per gallon. But this is still much too expensive.
Millions are struggling to afford gas prices at either price. This hits lower and middle-income Californians especially hard as they bear a disproportionate share of the burden from higher gas prices. They are looking for action to bring gas prices down to the typical range we paid for gas just months ago.
These higher prices aren’t due to oil company greed or “windfall profits,” but rather are the result of costly, California-exclusive energy mandates imposed over the years by state policymakers. These mandates include cap-and-trade regulations, motor vehicle fuel standards that require emissions to be cut by 34 percent in California by 2025, low-carbon fuel standards, and expensive electric vehicle subsidies.
In addition, a spring 2021 report by Stillwater Associates noted that “price increases due to taxes and fees are not insignificant,’ calculating that government gas taxes and fees added about $1.19 per gallon to the price of fuel in California.
If lawmakers want to give Californians meaningful relief, then they should act to – in the words of a recent PRI study – legislate energy prosperity.
Before the COVID-19 pandemic lockdowns temporarily reduced the number of cars on the road, California drivers paid a 37 percent premium for gasoline versus the national average.
As PRI has documented, repealing these California-exclusive mandates on gasoline, could – based on driving trends and average gas prices in 2019 – save consumers between $9.5 billion and $9.6 billion annually. While gasoline prices are much higher today both in California and nationally, California’s relatively higher costs remain. The need for realizing these savings is greater, however, because of gasoline’s significantly higher share of income today compared to three years ago. Lower- and middle-income Californians would also realize the lion’s share of the savings if the state reformed its gasoline mandates.
Back in 2020 when the study was released, we projected that repealing or reforming California gasoline and energy mandates would be the equivalent of a major tax cut – and would also boost average annual real state GDP growth between 3.1 percent and 3.3 percent. This would increase the size of California’s economy, adjusted for inflation, between $122.5 billion and $223.4 billion.
Well-intended policies meant to better the lives of Californians have not made things better for Californians or proven particularly effective in reducing emissions. They’ve only increased prices at the pump, furthering the strain on millions of overburdened Californians who can’t afford $4 per gallon gas, let alone $6 per gallon prices.
The sooner policymakers look in the mirror and realize that they are the prime culprit of California’s astronomical gas prices, the faster Californians will finally realize significant relief at the pump.
Tim Anaya is the Pacific Research Institute’s senior director of communications and the Sacramento office. Wayne Winegarden, Ph.D. is senior fellow in business and economics and director of PRI’s Center for Medical Economics and Innovation.