Rising gas cost prompts renewed discussion of ‘mystery supplement’ behind higher California prices – CBS San Francisco
BERKELEY (KPIX 5) – Californians currently pay about $1.70 more per gallon than the national average. As lawmakers discuss ways to help offset some of the rising costs, there is again talk of the “mystery surcharge” which is now seven years old.
There are a number of known reasons why Californians pay more for gasoline. For example, some environmental taxes and charges are higher in California. There is also the cost of producing the specific gas mixtures we use here.
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“All of that, the taxes, the cost of making cleaner gasoline is legitimate, it certainly makes a difference,” says UC Berkeley economist Severin Borenstein. “Before 2015 explained all the difference between California and the rest of the country.”
That’s when the Torrance refinery explosion happened and sent prices skyrocketing across the state.
Borenstein said prices never fully recovered. According to his calculations, even if one eliminates all taxes and additional production costs, California prices are still higher than the national average.
“In 2021, the differential averaged $0.30 a gallon,” Borenstein told KPIX 5. “And that translates to about $4 billion for California over the course of a year.”
“Yeah, so with a tank here and a tank there, it gets pretty bad,” Myles Darrah said as he filled up his van at Martinez. “All in all, it’s about $250 to fill up.”
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The current price spike has got Sacramento talking about gas costs, and the so-called “mystery surcharge” has surfaced in this discussion – again. Governor Gavin Newsom ordered an investigation in 2019, and Borenstein himself was on a committee that looked into the matter in 2017.
“And we didn’t have the power to compel the oil companies to talk to us, so they didn’t,” Borenstein said. “And so we haven’t really understood what’s happened, what’s changed, and why we’re seeing much higher prices.”
Oil producers say what we see is simply the cost of doing business in California. Some are hoping cost issues will lead to another penny-by-penny look at math.
“If it costs $4 billion a year, you would think it’s worth a few million to try to figure it out,” Borenstein said. “They haven’t wanted to do it yet.”
As for that state hearing, it turned into a moment of screaming when Democrats decided to take a bill that would have suspended the gas tax and replace it with language that added a new tax on gas suppliers.
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In a statement, a spokesperson for the Western States Petroleum Association said, “No one wants to pay high prices at the gas pump. The fact is that many factors influence the evolution of the price of gasoline and diesel: cost of land, convenience and location, brand image, taxes and fees, but none is more important than the dynamics of the crude oil supply and demand. Also, it’s important for Californians to know that the first $1.30 they pay per gallon of gas goes toward taxes and climate program fees. The Governor, Attorney General and their Special Investigative Committee have failed to identify price gouging by members of the oil industry. Now is not the time to point fingers and defame. Our collective focus should be what we can do now to limit market uncertainty in the future and not wait for another crisis. As the state moves toward more renewable and sustainable energy sources, the reality is that we are going to need affordable and reliable fuel for nearly 40 million people for the foreseeable future.