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PD Editorial: Mystery gas surcharge warrants AG investigation

California’s gasoline prices are outrageously high, and no one knows why - except maybe the petroleum companies, and they’re not telling. Even the California Energy Commission’s Petroleum Market Advisory Committee is baffled, which should be doubly concerning because those folks are the experts.

The average gas price in Sonoma County one day last week was $3.309 per gallon. That was 8.2 cents more than the California average and $1.05 more than the national average.

Just think how much Californians could save if gas were a dollar cheaper here. That’s not likely, though. California voters last fall decided to continue the 12-cent additional state tax on each gallon of gasoline, a 20-cent increase for diesel, plus other fees. Federal and California taxes add about 73 cents to the price per gallon, trailing only Pennsylvania’s 77 cents, according to the American Petroleum Institute.

But taxes alone do not explain the high prices.

Our northern neighbor, Oregon, approved a massive transportation-finance package in 2017 with a gas tax increase. The total taxes there still come up short of California’s by 18 cents, but the strange thing is that gas is 52 cents cheaper in Oregon. Something doesn’t add up.

Even when figuring in the higher production costs caused by California’s tough environmental standards, there is an unexplained cost of 22 cents per gallon beyond what other states charge. Severin Borenstein, a professor at UC Berkeley’s Haas School of Business and the faculty director of its Energy Institute, refers to that 22 cents as the “mystery gasoline surcharge.”

Borenstein has been tracking it for years and says that from 2000 to 2014 the mystery surcharge was usually about ?2 cents and never more than ?12 cents. Then it jumped to ?48 cents after the Torrance refinery fire in February 2015.

Fair enough. The supply interruption could have justified a spike. But four years later, well after the refinery returned to full production, that unexplained surcharge remains high at 22 cents. Borenstein estimates it has cost Californians more than $17 billion since the refinery fire, or about $1,700 for a family of four.

His analysis is particularly relevant because he chaired the aforementioned Petroleum Market Advisory Committee, which found several anomalies in the state’s gasoline market but could not explain the mystery surcharge.

Nineteen Democratic legislators, including some from our area, therefore have asked Attorney General Xavier Becerra to use the state Justice Department’s subpoena power to get some answers. He should. This matters to consumers. This matters to businesses. This matters to legislators. This should matter to the attorney general.

State and federal lawmakers often demand investigations into spikes in fuel prices, but those investigations either don’t happen or are cursory. Becerra has a chance to do better.

If California’s higher gas prices are rational because of legitimate supply and production costs, let the petroleum companies provide the evidence. If the mystery surcharge is simply added profit - what people might consider “price gouging” - the public deserves to know that, too.

Californians chose to invest in better transportation and a better environment by paying higher gas taxes relative to the rest of the country. They never agreed to unexplainedly enrich the petroleum industry.

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