Fall 2003

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Guest Commentary

Audrie Krause represents STOP Hidden Gas Taxes, a consumer, business and taxpayer coalition. Cal-Tax is a member of the coalition.

In 1999, the Legislature directed the California Energy Commission (CEC) to develop a plan to stabilize the state’s volatile gasoline prices. A really simple approach would have been to figure out as many cost-effective ways as possible to add to the supplies of environmentally sound transportation fuels – existing clean ones and new, to-be-developed, renewable ones – and then let the market select the winners.

So what did they come up with? After spending millions of tax dollars analyzing this very complex problem with the state’s Air Resources Board (ARB), the commission and the ARB decided that the best way to reduce gasoline prices is to mandate an arbitrary reduction in demand. Their goal is wrapped in a proposal that includes increasing vehicle fuel efficiency and substituting non-petroleum renewable fuels for existing, clean-burning gasoline. Worthy goals, but to actually achieve those goals they may have to set the state’s consumers on a collision course with billions of dollars in higher gasoline taxes and increased vehicle license fees.

You can read about all this for yourself in the Energy Commission’s reports on Reducing Petroleum Dependence and again in its recently adopted final Integrated Energy Policy Report. But, since there are thousands of pages to review, here’s a brief summary of the facts.

The CEC staffers who wrote these reports attempted to bury the possible fuel tax increase options beneath optimistic rhetoric that their goal of reducing gasoline demand by 15% from 2003 levels, by 2020 could be achieved by increasing federal vehicle efficiency standards (CAFÉ).

Again, a worthy goal, but the fact is the state has no authority to change CAFÉ standards – only the federal government can do that.

So that brings us back to what many believe was the Energy Commission’s and Air Resources Board’s intent all along: to reduce the availability and use of cleaner-burning gasoline in favor of as yet unproven technologies and fuels of their choosing.  But what will they do if the efficiency and substitution approaches don’t work?

Although they state they would go back to the drawing board, the only other choice they have if the substitution approaches don’t work is to increase gasoline taxes and vehicle fees to limit the use of the existing fuel supply. To find out how much they might increase these taxes and fees, we can look at the commission’s “Task Three Report on Reducing Petroleum Dependency.”

In the section of the report entitled “Fuel Pricing Options,” you will find these specifically proposed taxes and fees that might give you financial reasons to stay out of your vehicle:

• Increase gasoline and diesel taxes by 50 cents per gallon. This means an annual increase of $7.3 billion in fuel taxes and the loss of 80,000 jobs, according to a study by an independent state finance expert.

• Pay-at-the-pump auto insurance at a cost of 43 cents per gallon. This idea would cost drivers more than $6 billion a year and 34,000 Californians would lose their jobs.

•  A new Vehicle Miles Traveled Tax of 2 cents for every mile you drive. The price tag for this scheme is about $6 billion a year and another 65,000 lost jobs.

• Higher taxes on minivans, SUVs and pickups of $3,500 per vehicle. It all adds up to possible fuel tax increases of more than $19 billion per year, nearly $200 billion over a 10-year period. Because of the drain on the economy these tax increases would create, more than 179,000 people could lose their jobs.

And remember, the CEC’s mission was to stabilize gasoline prices.

So what would be a feasible strategy to achieve the goal of protecting gasoline consumers from market volatility? A clear-headed analysis of why gasoline prices are volatile would be a start.

But first a little perspective – lots of folks gripe about gasoline prices. The fact is, fuel prices do fluctuate. But, over the last 20 years, based on Bureau of Labor Statistics data, gasoline prices have risen far less than most other products and services we use in our daily lives, including food, clothing, housing, insurance, utility costs, rent and medical care… to name a few.

Having said that, gasoline prices in California are generally higher than the rest of the country for three main reasons: California’s gas taxes are far higher than the national average; our gasoline is cleaner-burning, which protects our air quality but makes it more expensive to produce; and, government regulations constrain increasing gasoline supplies because it is difficult and expensive to expand refineries or build new ones, or to upgrade import facilities and other petroleum infrastructure.

Cutting gasoline taxes and repealing cleaner-burning gasoline rules aren’t viable options.  The best option that remains to reduce market upsets is to increase gasoline supplies.

The logical steps are to streamline the state’s cumbersome permit system by getting rid of overlapping and duplicative rules while still protecting the environment, and to avoid arbitrary policy mandates such as the 15% goal of reducing gasoline demand which discourages investments that could add to California’s future gasoline supplies.

So next time you’re at the gas pump, think about the higher fuel taxes that may be in your future, and contact your elected representative to make sure he or she knows your answer is “NO!”