{"id":5625,"date":"2021-02-01T17:24:36","date_gmt":"2021-02-02T01:24:36","guid":{"rendered":"http:\/\/probable-carton.flywheelsites.com\/?p=5625"},"modified":"2021-02-02T16:47:25","modified_gmt":"2021-02-03T00:47:25","slug":"sacramento-policymakers-drive-californias-high-gasoline-prices","status":"publish","type":"post","link":"https:\/\/stillwaterassociates.com\/sacramento-policymakers-drive-californias-high-gasoline-prices\/","title":{"rendered":"Sacramento policymakers drive California\u2019s high gasoline prices"},"content":{"rendered":"
February 1, 2021 California has a history of having the highest gasoline prices in the country. Why? For one, the West Coast fuels market is isolated from other supply\/demand centers. As such, the West Coast is susceptible to unexpected outages of West Coast refineries as it is unable to backfill an unexpected loss in supply by quickly supplying additional product from outside of the region. Examples of these periods of significant outages include BP Cherry Point in 2012, Chevron Richmond in 2012, and Exxon Mobil Torrance in 2015. The supply, demand, and pricing trends in this unique market are covered in-depth on an ongoing basis over on Stillwater’s West Coast Watch<\/a><\/strong>.<\/p>\n In addition to the West Coast\u2019s \u201cisolation\u201d and supply challenges, there are three major reasons for California\u2019s higher gasoline prices:<\/p>\n The price at the pump is especially important as the cost of gasoline can be a significant portion of consumers\u2019 monthly budgets. We know that gasoline prices make the news when they rise, so understanding why gasoline prices rise is important. Let\u2019s talk about what causes gasoline prices to rise.<\/p>\n The figure below illustrates the average retail prices of regular gasoline for the U.S. and for California. The columns show the gasoline price premium in California versus the rest of the country. As can be seen, the premium paid by Californians for a gallon of gasoline compared to the rest of the country has risen rapidly since 2015 and was about $1.00 per gallon in 2019 and nearly $0.90 per gallon in 2020 (a slight decline due to the effects of the pandemic on the fuels market).<\/p>\n <\/a> The years 2011, 2015, and 2018 are highlighted as those years marked significant changes to California taxes and greenhouse gas (GHG) fees on gasoline. The year 2011 (bright green column) marked the first year the Low Carbon Fuel Standard (LCFS) was applied. The year 2015 (light green column) marked when the fuels under the cap provision began under the state\u2019s Cap & Trade program. The year 2018 (light blue) marked the first full year after the fuel excise taxes were increased by Senate Bill 1 (SB1) in November 2017.<\/p>\n The federal excise tax of 18.40 cents per gallon (cpg) on gasoline is the same across all states and has been at this level since 1997, but state and local taxes and fees levied on gasoline vary from state to state. According to the American Petroleum Institute (API)<\/a><\/strong>, taxes and fees, including the federal excise tax, average 62.25 cpg across the U.S. but excluding California<\/em>, with a high of 77.10 cpg in Pennsylvania to a low of 32.19 cpg in Alaska. California is shown at 81.45 cpg, the highest indicated by API. Our analysis, however, shows that API\u2019s pricing index does not include all the taxes and fees.<\/p>\n In California, the current gasoline taxes and fees applied to gasoline are:<\/p>\n The last two items, FUC and LCFS, are not considered in the tax and fee category by API or the U.S. Energy Information Administration (EIA) as these items do not strictly use a cent-per-gallon rate, a percentage of price, or may not be collected by the state. The two GHG \u201cfees\u201d are an indirect charge to the fuel on the fuel characteristic and a GHG emission price. However, since the application of both GHG programs mimic a fee or tax and are passed through to the retail consumer, they are included in our definition of taxes and fees.<\/p>\n The following figure compares the total retail gasoline taxes and fees from 2014 through 2020 in California. As can be seen, the trend of the price premium generally follows the amount of taxes and fees that are applied to gasoline.<\/p>\n <\/a> The following figure illustrates each of the components included above for 2014 and 2021 which covers the period when the California gasoline taxes and fees increased sharply. As can be seen, the total taxes and fees imposed by California tracks with the difference between the retail price of gasoline in California and the U.S. average. The difference in the price of gasoline increased by 118% from 38.7 cpg in 2014 to 84.2 cpg in 2021, while the California-specific taxes and fees increased by 90% from 52.8 cpg in 2014 to 100.1 cpg in 2021. The three largest components of the increase are the LCFS at 22.6 cpg, FUC at 14.3 cpg and the state excise tax at 12.7 cpg. Sales taxes have decreased in parallel with the price of gasoline which has declined due to lower crude oil prices.<\/p>\n <\/a><\/p>\n As can be seen, price increases due to taxes and fees are not insignificant. Using the 15.4 billion gallons of gasoline reported by the California Department of Tax and Fee Administration (CDTFA) for 2019, the cost of these three increases would amount to $762 million paid by California gasoline consumers at a normal gasoline consumption rate. The following table shows the value of each component.<\/p>\n The total listed in the table above is for gasoline only; it does not include the taxes and fees that have increased on diesel fuels in California.<\/p>\n Conclusion: Contrary to what some may claim, GHG-reduction programs and taxes on petroleum fuels have a cost, and these costs are passed through to consumers.<\/strong><\/p>\n Want a deeper or more specific analysis? Contact us!<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"February 1, 2021 By Leigh Noda California has a history of having the highest gasoline prices in the country. Why? For one, the West Coast fuels market is isolated from other supply\/demand centers. As such, the West Coast is susceptible to unexpected outages of West Coast refineries as it is unable to backfill an unexpected…
\nBy Leigh Noda<\/a><\/strong><\/p>\n\n
What is the price p<\/u>remium for California gasoline compared to the rest of the U.S.?<\/u><\/h2>\n
\nSource: EIA <\/em><\/p>\nWhat t<\/u>axes and fees contribute to the California retail gasoline price?<\/u><\/h2>\n
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\nSources: EIA, California Department of Tax and Fee Administration and Stillwater analysis<\/em><\/p>\nHow much are the components of Taxes and Fees?<\/u><\/h2>\n
Added Costs to California Consumers
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