Profits Tax on Gas in California Would Raise Prices Even Higher

Gas prices -- seen here at more than $7 a gallon are displayed at a Chevron gas station in Mill Valley, Calif., on Oct. 3, 2022 -- are among economic uncertanities that will be a major influence on how Americans vote in Nov. 8 midterm elections. Justin Sullivan/Getty Images

Commentary

I’ve been dreading getting into my creaking 2010 Camry lately when it needs a fill-up. Prices in Orange County and across the state are soaring toward $7 a gallon.

As of the morning of Oct. 11, GasBuddy.com pegs California’s average price at $6.29 a gallon. Orange County is a little lower, at $6.27.

But the worst “solution” would be for the California Legislature to impose a “windfall profits tax” on the oil companies, supposedly because they’re “gouging” drivers.

“Crude oil prices are down but oil and gas companies have jacked up prices at the pump in California. This doesn’t add up,” said Gov. Gavin Newsom in a recent statement. “We’re not going to stand by while greedy oil companies fleece Californians. Instead, I’m calling for a windfall tax to ensure excess oil profits go back to help millions of Californians who are getting ripped off.”

His office explained “these recouped windfall profits will then be directed to rebates/refunds to California taxpayers impacted by high gas prices.” The Legislature would have to decide how that’s done. But it might be something like the checks being sent to Californians from the $100 billion budget surplus, up to $1,050 a family.

His office’s explanation continued, “The California Energy Commission (CEC) has sent a letter to industry executives demanding immediate and comprehensive explanations for this inexplicable, unprecedented spike in gas prices within the past 10 days. This explanation must address the fact that there haven’t been any new state costs or regulations, that planned and unplanned maintenance typically does not result in large increases like this, and crude oil prices are down.”

But crude prices were up even on Sept. 30, the date of the governor’s statement, and are up even higher now. The price of a barrel of the black gold rose from $76 on Sept. 26 to $88 on Oct. 6. That’s a 16 percent increase in 10 days. And it has only become worse.

Larger Impacts

The Washington Post reported Oct. 5, “A coalition of oil-producing nations led by Russia and Saudi Arabia announced Wednesday it will slash oil production by 2 million barrels per day, in a rebuke to President Biden that could push up gas prices worldwide, worsen the risk of a global recession and bolster Russia in its war in Ukraine.” That’s the OPEC+ group, which now includes Russia.

There’s nothing California can do about any of that. Foreign policy is set by the federal government. And even Washington has limited control over world affairs. The Ukraine War has disrupted global energy supplies. Russia obviously doesn’t care what Newsom thinks on oil prices, nor does Saudi Arabia.

Biden earlier this year started draining America’s Strategic Petroleum Reserve. It’s supposed to be used only in a real emergency, such as a war or national disaster. He did so to bolster Democratic hopes before the Nov. 8 election. But the draining is almost over, and the market is reacting to the end of the program by raising prices. The global market also is far more powerful than what any one nation does.

Another factor is the general inflation affecting almost everything, stemming from the massive overspending in recent years. That includes the $740 billion in the laughably named Inflation Reduction Act just passed. And the $1.9 trillion for the American Rescue Plan from 2021, which only rescued those who got the pork packages. The rest of us got inflation and a future bill for the increase in the national debt, now above an incredible $31 trillion.

Windfall Tax?

A windfall profits tax would discourage oil companies from investing in more infrastructure in California. They also would just pass on the tax increase to consumers. Businesses don’t really “pay” taxes, they only collect them. The money to pay the taxes comes from increasing prices or cutting pay to workers. If the taxes rise too high, companies just leave California, as so many have, or go broke.

If he wanted to be constructive, Newsom would call on Biden to restart the Keystone XL pipeline and start approving more oil drilling to increase our own energy supply here at home. Before Biden took over, America had become self-sufficient in energy for the first time in decades.

Newsom also should call a special session of the Legislature, not to impose a windfall profits tax, but to suspend the 53.9-cent gas tax from 2017, which raises $5 billion a year. That would give drivers a palpable break. Especially helped would be the poor and middle class who often drive long distances to coastal jobs from their abodes in the less expensive inland areas.

But that’s not going to happen. Newsom just is grandstanding, once again, on an issue in the news. The higher gas prices here will be another reason for Californians to leave.

Here are the gas prices, per AAA, on Oct. 11 in several states. Note Florida and Texas, about half the California price. Newsom has been feuding with their governors over which state better treats its citizens.

• California $6.29
• Arizona $4.57
• Utah $4.21
• Pennsylvania $3.91
• Virginia $3.53 (federal government workers)
• Connecticut $3.45 (liberal state)
• Florida $3.34
• Texas $3.30

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.