Jim Hartman
California Gov. Gavin Newsom’s latest gambit to punish Big Oil would result in higher prices for gasoline in Nevada and Arizona, sparking bipartisan backlash.
Nevada Republican Gov. Joe Lombardo and Arizona Democratic Gov. Katie Hobbs joined in a letter to Newsom warning his latest plan to mitigate rising gasoline prices will backfire and harm their states’ residents.
Last year, Newsom promised to “root out illegal price gouging by greedy oil companies.” The result: the California Energy Commission found no price gouging.
Now, Newsom has called a special legislative session to give the state of California power to increase refinery inventories and allow bureaucrats to veto refinery maintenance plans if they determine statewide inventory levels are too low.
California’s governor claims this will prevent “profit spikes for Big Oil,” but his plan would do the opposite.
Refineries would be forced to store excess reserves, artificially reducing supply, which would lead to higher prices. Building one new storage tank can take a decade and cost $35 million.
But this time all the states that get oil from California refineries would pay more.
California refineries supply nearly 90% of Nevada’s gasoline and half of Arizona’s market. Regulations that raise costs on California’s refineries raise prices at the pump in Nevada and Arizona.
This is why gasoline prices in Nevada ($3.95) and Arizona ($3.36) are higher than the national average ($3.21) despite both states having low state gas taxes – 23.8 cents in Nevada and 19 cents in Arizona.
The easiest way for California to lower its cost at the pump is to reduce its highest-in-the nation gas tax. Today, it stands at a whopping 68.1 cents per gallon.
In addition, California commuters pay the federal fuel tax of 18.4 cents per gallon, along with premiums for the state’s cap-and trade program, sales taxes and an underground storage fee.
This adds up to $1.21 per gallon more than what the gas costs on its own. And California’s special gasoline blend adds about 10 cents of cost per gallon. No one else in the world uses it.
California has the highest gas price in the nation ($4.73).
The Golden State’s burdensome climate regulations and permitting headaches have caused seven California refineries to cease production over the past decade. In 1984, California had 34 refineries. Today there are just 14.
This has dramatically reduced supply, not only for California, but for Nevada and Arizona as well.
Even the California Energy Commission warns that Newsom’s new proposal “may artificially create shortages in downstream markets,” meaning in Nevada and Arizona, and “increase average prices.”
In their letter, Lombardo and Hobbs plead with Newsom: “For the good of our neighboring constituencies, and for the greater good of consumers across the West we ask that you reevaluate mandating refinery inventory.”
Lombardo added “the people of Nevada and Arizona should not have to foot the bill for California’s misguided policies – especially when it comes to higher gas prices.”
Chevron’s recent decision to leave California and move its global headquarters to Houston is the latest evidence of the Golden State’s increasingly hostile business environment.
California sued Chevron and other major energy companies for, as Newsom put it, “wreaking havoc on our planet and lying to people about the dangers of fossil fuels.”
Over the past decade, companies from banking to aerospace have left California, taking thousands of middle-class jobs with them.
California has now shed major companies including Bank of America, Lockheed-Martin, Charles Schwab, pharmaceuticals supplier McKesson and commercial real estate giant CBRE. More recently the exodus has extended to high tech, with the loss of Hewlett Packard Enterprise, Oracle, Palantir, Tesla and SpaceX.
Why should Nevadans and Arizonans be required to pay higher gas prices for energy policies imposed by California politicians, like Newsom, they didn’t vote for and can’t vote against?
E-mail Jim Hartman at lawdocman1@aol.com.