Oakland, CA—Californians often pay $2 more per gallon of gasoline than the rest of the nation. Why? Higher taxes? Yes. More regulations? Yes. Oil company greed? No, say the authors of a new report detailing why Golden State drivers shell out more when filling up their tanks.
Federal, state, and local politicians and regulators have enacted policies in California that result in persistently higher gasoline prices at the pump, as well as greater price volatility during periods of disruption. Rather than accepting responsibility, officials—led by California Gov. Gavin Newsom—have accused producers of “greedy profiteering.” For those reasons, politicians and regulators have earned the dishonor of the Independent Institute’s 14th California Golden Fleece® Award. Their practices have broken the public trust by undermining market competition and increasing consumer prices, all the while blaming and shaming oil and gasoline producers and marketers for problems that politicians and regulators have created through their policy choices.
“Over the past 20 years, gasoline prices for Californians, once in the middle tier, have surged near the top of all US states. This is a consequence not of global market fundamentals, but conscious public policy choices by government officials at all levels,” said Robert J. Michaels, coauthor of the report Pain at the Pump: Blame Politicians, Not Producers, for High California Gasoline Prices.
The average increase in gasoline prices nationally from 2009 through 2021 was 30.7 percent, but prices in California increased by 57.9 percent. The report says some gasoline price relief is possible for Californians, but it would require removing blatant government interventions at the federal, state, and/or local levels that keep California’s oil and gasoline markets less competitive, more rigid, and more expensive than other parts of the country. Solutions to the state’s higher gasoline prices might include: allowing for expansion of refinery capacity and supply pipelines, abolishing the Jones Act, relaxing the most stringent environmental regulations in the country, removing local restrictions on the building of new gas stations, and reducing the highest state taxes and fees in the nation, among others.
“We’re not going to stand by while greedy oil companies fleece Californians,” Gov. Gavin Newsom said in September 2022.
It is not, however, the oil companies that are fleecing Californians. The oil companies compete in a global oil market that is governed, essentially, by “the law of one price.” Instead, it is the policies of government officials that are fleecing California drivers, confining them to a supply-constrained and high tax “fuel island.” And “the policy choices that drive California gasoline prices higher act, effectively, as a regressive tax, hitting hardest the state’s poorest residents,” said coauthor Lawrence J. McQuillan.
Credentials: Robert J. Michaels, PhD, is a research fellow with the Independent Institute, a professor emeritus of economics at California State University, Fullerton, and an independent consultant. Dr. Michaels has written peer-reviewed articles on energy policy and numerous research papers on many topics. He has served as coeditor of the scholarly academic journal Contemporary Economic Policy and testified on energy issues before committees of the U.S. Congress on four occasions.
Lawrence J. McQuillan, PhD, is founder and director of the California Golden Fleece® Awards. He is also a senior fellow with the Independent Institute and director of the Independent Institute’s Center on Entrepreneurial Innovation. He is the author of hundreds of scholarly research reports, commentaries, and books, including California Dreaming: Lessons on How to Resolve America’s Public Pension Crisis.
To interview Robert Michaels, contact Robert Ade, [email protected], or (510) 635-3690.
Read the full report here.
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