Gas taxes kick in today; more increases to follow?
Lines drawn over expected gas price increases from CARB mandate; supporters say new regulations critical for environmental benefits, critics say it will harm consumers
NORTH COUNTY — Today marks a new era in the state’s battle over affordable gas prices and emissions.
The state’s automatic tax increase from Senate Bill 1 will add 1.6 cents per gallon of unleaded. But the most controversial new measure is from the California Air Resources Board’s Low-Carbon Fuel Standard (LCFS).
A study from the University of California, Irvine showed, and CARB Chairwoman Liane Randolph told reporters on June 27, prices would most likely increase by 5-8 cents per gallon. Gov. Gavin Newsom’s office conducted its own fact check and said CARB’s new fuel standard is estimated to reduce fuel costs for Californians per mile by 42%, save a projected $20 billion by 2045 and reduce carbon dioxide-equivalent gases by 558 million metric tons through 2046.
Critics of the new LCFS mandates, though, say gas prices could increase by up to 65 cents per gallon by the end of the year. Studies from the universities of Pennsylvania and Southern California detail those higher costs for motorists.
The two camps have engaged in fierce debate for months, if not years, on the actions of the legislature in addressing oil companies, gas prices and pollution concerns. Some estimates warn consumers will be paying more than $8 per gallon in the coming years due to the new mandates.
Newsom, though, slammed critics of the LCF and new mandates of projecting prices of more than $8 per gallon in the coming years. In his fact check, his office said those claims are false and have no evidence to support the prospect of gas prices topping $8 per gallon, let alone the 65-cent increases.
California has the highest average price per gallon in the U.S. at $4.59 per gallon of unleaded as of Monday, according to AAA. In San Diego County, the average price $4.63.
“According to a 2024 report, thanks to major improvements in fuel efficiency, California drivers rank 45th in the nation for gasoline consumption and 21st in spending on gasoline per capita,” Newsom’s fact check reads. “Trump’s tariffs and policies impacting the price of crude oil stand to swing gas prices far more than any state policy. Driven by misinformation pushed by Republican lawmakers and the oil industry, there remains a lot of speculation about California gas prices.”
Those critics have also warned those increases will crush everyday residents and lead to higher prices for goods and services across the board.
Additionally, those critics, especially Republicans at the State Capitol, have slammed Newsom and Democrats for special session legislation, which has led to the announcement of two refineries shutting down this and next year. Those refineries account for about 20% of the state’s capacity.
Newsom, though, says the refinery shutdowns will have little impact on the prices.
“The regulation was pushed through by the California Air Resources Board (CARB), a panel of wealthy and unelected officials hand-picked and directed by Governor Gavin Newsom,” Senate Minority Leader Brian Jones (R-San Diego) said in a post for a petition to change the mandates on Change.org. The change comes into effect next month on July 1st … and too many leaders in Sacramento don’t seem to care. As Senate Minority Leader, I have been fighting this unaffordable 65-cent gas price hike. Californians already face the highest gas prices in the country. Hard-working families shouldn’t be forced to pay up even more.”
Newsom signed AB X2-1, which gave the California Energy Commission the authority to set minimum fuel storage requirements at refineries and to enforce resupply plans for maintenance shutdowns.
Newsom signed another law allowing the CEC to impose penalties on refineries for “excess profits,” or price gouging. Also, analysts have said the new storage regulations will be too costly for companies to build, maintain and lead to even more imports, which could lead to more increases.
Supporters say AB X2-1 is critical to ensure refiners keep enough supply to prevent price spikes during regular or unexpected maintenance and outages.
In addition, governors Katie Hobbs (D-AZ) and Joe Lombardo (R-NV) sent a joint letter to Newsom to withdraw his AB X2-1 proposal as it would impact gas prices in those states. Both Arizona and Nevada receive their most of their fuel supplies through pipelines from California.
However, during an Assembly committee meeting several weeks ago, legislators called out CARB and other agencies for not finding evidence of price gouging. The hearing was contentious as Randolph said CARB does not factor in the impact to residents and the increases in cost of living as a result.
Other committee Democrats also ripped Randolph over price gouging allegations being unfounded.
Assemblywoman Jasmeet Bains (D-Bakersfield) called for Randolph’s resignation amid the tense and explosive hearing. After Bains’ comments, CARB released a statement saying it does analyze the impacts on consumers.
“CARB has been given so much power they were prepared to ban gas and diesel cars and trucks single-handedly,” Bains said after the hearing. “It is outrageous the director would pursue such policies without even trying to analyze the impacts on prices.”
Randolph countered that gas prices are more than $1 cheaper than a few years ago in what appears to be a reference to when prices skyrocketed to an average of more than $6 per gallon in October 2022 and another price spike in 2023.
As previously reported in 2023, one refinery was shut down for regular maintenance, but an unexpected outage at another refinery led to the increases, Patrick De Haan of GasBuddy said in an interview in 2023.
“Implementing the July 1 effective date for the LCFS provides critical certainty to industry, as well as the LCFS credit market,” Randolph told KCRA on June 27. “But often lost in the noise around this program are our primary reasons for approving it: better health for Californians, our economy and the environment, as well as achieving required state and federal air quality standards. The bottom line is it’s the companies that set these prices; they can decide how much or how little they pass through, and that’s not something we can control.”
The LCFS, meanwhile, is a regulatory program mandating a reduction in carbon-intensive transportation fuels. The new mandate requires producers must increasingly blend or generate low-carbon fuels, which is enforced through a $2 billion credit market.
The cap-and-trade program, along with the automatic tax increase and undetermined impacts of the LCFS is giving some pause about the potential economic impacts from these actions.
“A core challenge for all of San Diego County, and especially North County, are taxes that reduce spending power of middle-class families,” San Diego County North Economic Development Council Executive Director Erik Bruvold explained. “This is especially true for increases such as what is proposed by CARB, which supports spending, such as on the High-Speed Rail project, which is mostly outside of our region. The net result is a decrease in demand for the products and services supplied by local businesses. While the state needs to make clean energy investments, much of what has been going on with cap-and-trade is tax redistribution from urban areas like San Diego County to a questionable investment in the Central Valley.”
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