Here’s How California’s Most Recent Move To Fight Climate Change Will Spike Gas Prices

Chris White | Energy Reporter
  • Regulators are enacting an obscure rule that is expected to raise California gas prices by as much as 36 cents per gallon within a decade.
  • Democrats now have to worry about another “hidden gas tax” that could derail their midterm campaigns.
  • Energy companies are warning California regulators against enacting stricter rules on oil refiners, especially as gas prices continue skyrocketing.

California regulators are enacting a rule targeting oil refiners that is expected to drastically increase gas prices as Democrats struggle to defend high fuel taxes.

The California Air Resources Board (CARB) is updating a regulation that will raise gas prices 36 cents a gallon by 2030, and diesel by 44 cents, according to the agency’s staff. Californians already pay an average of $3.73 a gallon for gas.

CARB voted in late September to strengthen the state’s low carbon fuel standard, an obscure rule requiring oil refiners to reduce the “carbon intensity” of their fuels, including the greenhouse gases generated through the manufacturing process. The rule is not as well-known as California’s cap-and-trade program, which forces industrial firms to reduce carbon emissions.

Cap-and-trade requires fuel wholesalers to reduce emissions as well — compliance raises gas prices by an estimated 10 to 12 cents a gallon, which is in addition to the higher costs caused from the low carbon fuel standard. California’s oil lobby argues the rule is a hidden tax that harms consumers.

“The cost of this program, given these increases, is definitely impactful on consumers,” Catherine Reheis-Boyd, president of the Western States Petroleum Association, told The Los Angeles Times Monday. “It really is a hidden gas tax that takes more out of the pockets of consumers.”

The previous regulation required energy producers to lower the carbon intensity of their products by 10 percent in 2020, as compared to 2010 levels. The new regulation requires a reduction of 20 percent by 2030, also compared to the 2010 baseline. Gas producers that cannot meet the standard are forced to purchase a credit from ethanol producers.

The costs manufacturers absorb from the credit are then passed on to motorists in the form of higher gas and diesel prices. Tightening these regulations create an upward pressure on fuel prices — a trend that some experts believe will continue in the next decade with the newly revised standards.

Meanwhile, Republicans are threatening to turn a recently passed gas tax increase into a millstone to wrap around the necks of vulnerable Democrats. Years of tax increases, pricey fees and a lack of infrastructure in California could provide the pressure required to give those threats some legitimacy.

Democratic Gov. Jerry Brown of California signed a law in 2017 imposing a 12 cents a gallon increase on citizens and raising the tax on diesel fuel by 20 cents a gallon. It also implements an additional charge to annual vehicle license fees ranging from $25 to $175 depending on the car’s value. (RELATED: Governor Brown’s Move To Hike California’s Gas Taxes Could Doom Dems As Elections Approach)

Opponents of Brown’s law managed to place a voter referendum on the November ballot to repeal the gas tax. It would reportedly lower the price of gasoline in the state to $2 a gallon by 2021, Politico reported in May. Republicans have now collected more than 1 million signatures, even though only 365,880 were needed to put it on the ballot.

California currently ranks seventh highest in the country when it comes to total taxes and fees, according to figures calculated by the American Petroleum Institute. And the recent increase makes California the second-highest gas tax in the country behind Pennsylvania. The Golden State’s gas tax would increase from 40 to 52 cpg.

It is unclear what voters will make of CARB’s new regulation on the low carbon standard, but Democrats are slowly backing away from the gas tax. Democratic congressional candidate Katie Porter, for instance, launched an Aug. 20 campaign ad calling claims that she supports higher gas taxes a “straight-up lie.” Porter is not the only candidate in her party pushing back against the now-toxic tax, which passed California’s congress along a partisan line.

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