PD Editorial: Taking the pinch out of gas prices

If you filled up recently, we don’t need to tell you that a tank of gas is taking a bigger bite out of your wallet.

The average price for a gallon of unleaded regular in Santa Rosa just hit $5, according to AAA. That’s well short of the record $6.61 last spring, but it still stings, especially given the rising cost of necessities such as food and natural gas.

High gas prices are as much a hallmark of California as the Golden Gate Bridge.

Yet the differential with other states widened to several dollars a gallon at times in 2022. Chevron, Exxon and Shell, meanwhile, pulled down record profits.

Gov. Gavin Newsom accuses oil companies of price-gouging and says they should be punished.

However, that may be easier said than done.

Newsom recommended a windfall profits tax on oil refiners and called the Legislature into special session. But experts say some of last year’s biggest markups occurred the retail rather than the wholesale level, so taxing refiners might not help consumers.

“The fact is, shooting first and then finding out if it is the right solution is likely to be just as detrimental as helpful,” Severin Borenstein of UC Berkeley’s Energy Institute said at a Feb. 22 state Senate committee hearing on gas prices and oil industry profits.

Here’s another conundrum: In a free enterprise system, what constitutes excessive profits?

California has a gouging law that limits price increases to 10% during an emergency declared by the president, the governor or a local government entity. The law applies to a range of products and services including lodging, food, emergency supplies, medication and fuel, but enforcement is spotty.

Antitrust laws prohibit collusion, but few businesses post their prices as prominently as gas stations, and motorists routinely wait in long queues to save a few cents a gallon at Costco and other discounters.

One more conundrum: To reduce greenhouse gas emissions, policymakers in California and around the globe plan to wean motorists off fossil fuels.

Higher gas prices make hybrids and all-electric vehicles more attractive, just as higher taxes substantially reduced tobacco use.

Still, no one likes to be fleeced, and politicians understand that angry voters might punish them for high prices.

So, as Borenstein suggested, the state should investigate how prices are set at the pump and why gas is more expensive in California than other states.

There are obvious factors, including taxes and a unique fuel blend that curbs air pollution. Beyond that, Borenstein long ago identified a “mystery surcharge” that isn’t easily explained. Finding the source might inform a debate about price-gouging or taxing windfall profits.

Oil companies blame taxes and regulations for high prices, and refinery maintenance — planned and unplanned — for price spikes.

With five big refiners supplying more than 90% of California’s gasoline, refinery closures push up prices. Multiple simultaneous closures ratchet prices still higher.

When that happens, there are no oil pipelines to provide relief from other states. Even if there were, older residents can remember the thick smog before California switched to cleaner-burning fuels that aren’t used elsewhere.

Perhaps the state could limit supply disruptions — and avoid price spikes — by coordinating nonemergency maintenance schedules among the refiners. That’s also worth exploring.

No one like paying $5 a gallon for gas. But legislators would be wise to figure out why we are before doing something that pushes prices even higher.

You can send letters to the editor to letters@pressdemocrat.com.