A State Assembly oversight hearing on petroleum in California painted an uncertain picture with projections the state has enough oil and gas for the next six weeks.
The state just received its last oil shipment — 2 million barrels — from a tanker coming from the Middle East. This comes as the average cost for a regular gallon of gas in California is over $6, according to AAA. The national average is $4.54.
UC Berkeley energy expert Severin Borenstein spoke to CapRadio’s Gerardo Zavala after providing his analysis of the situation to lawmakers on Tuesday.
This interview has been edited for length clarity.
Interview highlights
Why is this oversight hearing important?
The legislators are rightly very concerned about the very high price of gasoline and the burden it is imposing on drivers, particularly low and middle income drivers. Unfortunately, I think that the answer is the biggest component of the increase is the price of crude oil being driven by the war in the Middle East. And there's really nothing California can do about that.
We do have higher taxes and environmental fees. There's probably some flexibility or ability in the short run to lower the gas tax.
The last component is what I call the mystery gasoline surcharge, which is that extra amount that appeared in 2015 that is going to refiners and distributors and retailers and that we've never quite understood why it appeared in 2015 and what we could do about it.
What do you think lawmakers should do about the gas tax?
I put out a proposal 15 years ago, which was to institute a gas tax that moves in the opposite direction of crude oil prices so that when crude oil prices go up, the gas tax goes down. And when crude oil prices fall, the gas tax goes up. That would stabilize the price of gasoline and prevent these sorts of emergencies that are due to global disruptions.
Unfortunately, I get occasional nods from legislators, but nobody's actually taken it up as a way of dealing with these global disruptions. But if we do it, we have to have a plan for replacing that revenue, and I think the way to do that is to automatically raise the gas tax when the price of crude oil goes down.
Did you bring up that proposal today? What was the reaction?
There were some vague nods. Nobody said, "Oh, that's brilliant, and I'm going to introduce a bill." But you got to keep talking about these ideas and maybe a staffer heard it and will think about it and will talk to their legislator about it and I'll hear more.
Why do you think there’s so much hesitation to touch the gas tax?
Part of the hesitation to change the gas tax is because of the funds it brings into the state. And part of it, particularly with this proposal, is though it would reduce the volatility of gas tax for consumers, it would increase the volatility of gas tax revenue for the state. And legislators don't like revenue volatility. They like to have a lot of revenue to spend. I think the idea of ever lowering the gas tax is something that some legislators wouldn't be happy about.
The Western States Petroleum Association was very critical of state policies during the hearing. How much do you agree with them?
Anybody who has studied government regulation knows that not all government regulations are well crafted and that is certainly true in the oil industry too. But I think that they are sort of a one-note organization that, “There's too much regulation and none of this is our fault.”
It's just not very convincing because they don't really engage on the real issues. I have been talking about the mystery gasoline surcharge for almost a decade now. Their response continues to be, "Yeah, the cost of living is higher in California." And when you try to pin them down and say, "Okay, tell me exactly why that's causing a higher gas price and why it started suddenly in 2015." They don't really have an answer.
So I don't view them as really engaged on the policy debate. They are more just making political points.
What’s your biggest takeaway from this conversation?
There’s a lot of concern about the high price of gasoline and how it affects some of the constituents of these legislators.
I think that they probably got the message that most of the problem is not something the state of California can do much about and that's incredibly frustrating, but there are areas where they can still make changes that I think could be improvements. I hope they took that away. I'm not sure what they actually took away. We’ll find out when they respond.
