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Gary Coronado
What’s up with gas prices?
According to the San Francisco Chronicle, California has the highest gas prices in the country. This has always been the case. But posted gas prices throughout the state now range from $5.50 to over $7.00 per gallon. The reasons for this are complicated but the public is generally being told that this is due to two major factors; California taxes and fees on gasoline and the global price of oil is rising due to global pandemic supply constraints and the war in Ukraine.
But, this is not the whole story.
The price of gas in California: the basics
A recent article in The San Jose Mercury News reports that “California gas prices $1.32 higher than the national average” and breaks down the taxes and fees that help make California the most expensive place to fill up the tank. These include,
- 51.1 cent per gallon State Excise Tax (the highest state excise tax in the country) that is adjusted upwards, annually, based on inflation. As we know, inflation is currently running at 50-year highs, so we can expect this tax to rise dramatically;
- 18.4 cent per gallon Federal Excise Tax, which applies in all states;
- Sales taxes per gallon: The Mercury News claims that the average, total state and local sales tax is 3.7% but the state’s accounting indicates that the average is 8.62%. And even that figure is too low to reflect the real sales tax costs in major metropolitan areas, where sales tax goes as high as 10.25% places such as Los Angeles and Long Beach;
- 23 cent fee per gallon to pay for the cap-and-trade program;
- 18 cent fee per gallon for the state low carbon fuel program; and
- 2 cent fee per gallon to pay for hazards caused by underground storage of gas;
- And, finally, they attributed a portion of the rise in energy prices to a “phantom tax.”
In explaining this last item, they note that an investigation undertaken by the California Energy Commission concluded,
“The primary cause of the residual price increase is simply that California’s retail gasoline outlets are charging higher prices than those in other states.”
This has drawn allegations of price gouging, but it actually makes sense when you consider that the cost of living and doing business in California is also the highest in the country because we have the highest taxes. And, unfortunately, many of our taxes (like gas taxes) are regressive, hurting poor people the most.
This brings us back to the issue of overall unaffordability in California.
But while the average consumer is being hit by rising prices at the pump and by inflation in general, (rent, food, medical care, household products, etc.) the corporate profit picture is a different story.
There is inflation and then there is inflation
According to a March 10, 2022, new release from the Bureau of Labor Statistics, consumer prices increased 7.9% in February of 2022. This rate has not been seen since the early 1980s. However, according to an article by columnist Arthur Delaney at the Huffington Post, while consumer sentiment continues to fall,
“…corporate profits have soared as businesses reap the rewards of their customers’ continued willingness to pay more. The top 30 companies in the major industry categories of the consumer price index have raised prices while collectively boosting their profits, according to the liberal watchdog group Accountable.US.
In addition,
“Companies also bought back an additional $28 billion of their own shares, a strategy to boost the stock price, which also happens to boost executive compensation.
“These companies would have consumers believe they marked up prices just to keep up with outside costs, but the tens of billions in extra profits and generous giveaways to investors last year show otherwise,” Accountable.US President Kyle Herrig said in a statement.”
It turns out that this is fairly typical at the beginning of inflationary cycles. Companies tend to pass on price increases to their customers until consumer behavior starts to rebel and cut their spending. But the full story is more interesting. It seems that major oil companies have been taking advantage of rising energy price headlines.
According to reporting in the New Republic, as gasoline prices have been soaring,
“A new report from the U.K.-based think tank Common Wealth finds that the top five oil and gas producers in the U.S. are getting a wildly good deal from the U.S. government: While they rake in massive profits, their tax burden remains shockingly low... top producers have, on average, gotten money back from the IRS.
“While paying negative taxes to the U.S. government, these companies also delivered their investors $201.4 billion in dividends and share buybacks, or $40.3 billion on average—well above the $15.3 billion average for companies listed on the S&P 500. This year, pretax profits for ConocoPhillips, Chevron, ExxonMobil, Hess Corporation, and Devon Energy are expected to increase by 42.7, 38.5, 28.6, 56.9 and 44.6 percent respectively, as compared to last year. [Emphasis added] The oil and gas sector already receives extraordinarily generous subsidies” which “helped produce huge profits for oil and gas companies.
The most amusing argument is these same oil companies say they need even more subsidy to help them invest (translation: "greenwash") in a “low-carbon energy” future.
However, in the face of all this, instead of taking our grossly inequitable government subsidy system to task, state legislators are talking about declaring a gas tax holiday.
While I’m not against waiving gas taxes for a while—as I’ve said, gas taxes are one of the most regressive taxes we have, hurting the poor and the working-class the hardest--the net result of a temporary tax holiday will be essentially meaningless in the long run. And we will all end up suffering as projects to maintain and improve our roads and bridges go unfunded.
As noted in the San Francisco Chronicle,
“If the entire gas tax were suspended, the state would stand to lose billions of dollars depending on the length of the "gas tax holiday." The state Legislative Analyst's Office estimates the gas tax will raise $6.8 billion in the 2021-2022 fiscal year, and as Borenstein noted, most of the revenue goes to infrastructure projects such as roads and bridges.”
I realize there is a contingency, particularly in the San Francisco Bay Area, who believe that the punishment of anyone who’s not walking, biking, or taking public transportation is a vital social re-engineering policy that we need to maintain and that gas taxes should not be suspended but dramatically increased.
This, of course, totally ignores the "remote work" phenomenon and our country’s rapid transformation to electric and other alternative energy vehicles—all of which still require well-maintained roads and bridges. And the anti-personal-transportation-vehicle mantra even more profoundly ignores the fact that for many working-class people, a car or truck is their only lifeline to employment and self-sufficiency (gardeners, house cleaners, trades people of all kinds, taxi and delivery service employees and independent contractors, and many others).
Meanwhile, as oil companies continue to be massively subsidized and allowed to profiteer through good times and bad, (even though they are some of our country's most profitable corporations) our dysfunctional dependence on fossil fuels continues and the biggest loser will be our planet, the creatures that inhabit it, and future generations.
Bob Silvestri is a Marin County resident, the Editor of the Marin Post, and the founder and president of Community Venture Partners, a 501(c)(3) nonprofit community organization funded by individuals and nonprofit donors. Please consider DONATING TO THE MARIN POST AND CVP to enable us to continue to work on behalf of California residents.