By Don Schmitz
In a dystopian bad dream, Californians cringe as they pull into the gas station, paying prices we used to shake our heads at that our European brethren suffered under. Up to $7 a gallon, we pay 57 percent higher than the national average. Only Hawaiians, importing everything, pay more. Many states average $3 a gallon. Working class families are forced to make painful decisions — eating out less, not visiting family — while paying the rent, insurance, groceries, utility bills, etc., is becoming more problematic.
Sixty-four percent of Americans are living paycheck-to-paycheck, according to a Lending Club Report, and now 27 percent of Americans are dipping into their savings to pay for everyday expenses according to a recent Country Financial Security Index. We’re slapping down the plastic, the average credit card unpaid balance is over $7,000, balances have risen for five consecutive quarters, and nationally now stands at a record $1 trillion.
Inflation has hurt us around the country, but in California the ridiculous gas prices have exacerbated the pain. I can hear the sanctimonious reply from some in their affluent coastal communities: “Just buy an electric car” as they cruise in their $80,000 Tesla. Well, electric cars cost at least $10K more than the equivalent gas-powered car, and many can’t afford them, although 19 percent of new vehicles sold in California are electric. For now, 81 percent of us still rely on gas, and for the office worker commuting two hours each day, or the construction worker relying on his pickup, they must pay at the pump, no choice.
There are clear reasons why we have such expensive fuel, but you wouldn’t know it listening to the politicians and pundits. Understandably, voters are none too happy about this pain, so the deflection spin masters are working overtime. Understand the facts though. California is blessed with enormous petroleum resources; it literally oozes out of the ground, which native Americans used as lubricants and as a sealant. Oil was first commercially extracted here in 1860, and until 1930, we were the largest producer in the country and are still the seventh largest producer. Despite socialist fantasies, supply and demand is economically a consistent barometer of costs, and we have plenty of supply, so what’s the problem? Politically, we have decided not to utilize it for the laudable goal of fighting climate change. Monterey voters passed a ban on new oil wells, which the California Supreme Court ruled illegal and overturned in August.
Our Geologic Energy Management Division (CalGEM) issued only seven new well permits this year, compared to 200 last year, and they have been sitting on 1,400 new well applications. Offshore drilling has been banned since 1969. “Good!” many say, for the climate, for the environment, which I understand, but be honest about the inevitable outcome. While California produces 463,000 barrels of oil a day, we consume 1.8 million barrels daily. We import most of our oil and it’s growing, currently doubled from 2000. The California Energy Commission reports most imports come from Iraq, Ecuador, and Saudi Arabia, all with much more lax environmental controls.
The oil must be refined, but we have less refineries than in the 1970s, while our population doubled. Between 2017 and 2021 we lost 12 percent refining capacity and will lose 12 percent more by next year. We also require a special blend for refined gasoline to reduce air pollution, which is a good thing, but that costs at the pump. If one of our refineries shuts down for maintenance or an accident, the only place to buy our special blend gas is Korea or Canada, which is very expensive.
In 2012, California gas was “only” 30 cents more than the national average. In 2013, Democrats instituted a cap-and-trade program to cap carbon emissions, which adds 24 cents to each gallon. In 2015, the state added a “low carbon fuel standard, adding 22 cents.” In 2017, Democrats raised the gasoline excise tax by 12 cents and linked it to inflation. Tack on 10.7 cents for state sales tax, and 2 cents underground storage fee. We now pay $1.19 per gallon in taxes and fees compared to the national tax average of 39 cents per gallon. Six states suspended their gas taxes to provide their constituents relief, but California Democrats shot down a proposed suspension last year, keeping in place an automatic annual increase, which raised taxes an additional 4 cents in July.
Gov. Newsom blames the oil companies, stating, “This is one of the greatest rip-offs in modern American history.” Unable to pass a windfall profit tax, he’s creating a bureaucracy to investigate “price gouging” and penalize profits. Decades of denying permits for wells to tap our abundant supplies, or refineries to produce our gas, has cratered supplies, spiking costs, compounded with enormous fees and taxes. Big government created this unaffordable mess, not big oil. Happy motoring.