How California’s sky-high gas prices may go national
California was once a leader in both pop culture and political innovation. Now, it’s just a leader in bad ideas that threaten to spread nationwide.
Golden State drivers have been saddled with the highest per-gallon taxes on gas in the country for some time. But now, the state’s push into renewables is poised to raise prices — and wealth transfers – even higher. It’s a story of how drivers of gasoline engines are, through the magic of government mandates and credits, subsidizing electric cars. It begins with the California Air Resources Board (CARB). As the Wall Street Journal’s Allysia Finley writes:
CARB requires refiners to meet a declining average carbon-intensity score—90.74 this year—by blending more lower-carbon fuels. If they don’t meet the benchmark, they must buy regulatory credits, usually from renewable-fuel producers and electric utilities. The program has become an indirect subsidy for electric vehicles.
CARB awards regulatory credits to utilities whenever their customers charge electric cars at home. Utilities then can sell their credits to refiners. But they are required to use the money from their credit sales to subsidize electric cars. So Californians can get a $1,500 rebate from their local utility on top of $2,000 from the state and $7,500 from the feds for buying an electric vehicle. Sweet.
Yet drivers of gasoline-powered cars are subsidizing the utility rebates through higher fuel prices. As the state’s carbon-intensity benchmark has fallen, prices for regulatory credit prices have soared—from $17 on average in 2012 to $198 in the first quarter of this year. An analysis last fall by Stillwater Associates estimated that the program would add 24 cents a gallon to the price of gasoline this year and 63 cents by 2030.
The response of refiners is entirely predictable: they are switching to making renewables, because that’s where the profits, and subsidies, are waiting. As more refiners switch to making fuel out of, say, old cooking oil, rather than petroleum, the state’s gas supply gets smaller. And because the CARB requires a very special gas blend, supply gets further squeezed.
Low supply plus high demand equals high prices. But here’s the kicker:
While Californians sick of paying more than $100 to fill up their tank can move to another state, the refuge may prove fleeting. Progressives are clamoring for the Environmental Protection Agency to emulate California’s low-carbon fuel standard as a way to subsidize electric vehicles.
Because nothing says “we care” more than reverse-Robin Hood wealth transfers that steal from the poor and give to the rich.